In this article, we take a look at 5 safe stocks to buy according to hedge funds. If you want to read our detailed analysis of safe stocks, go directly to see the 11 Safe Stocks To Buy According To Hedge Funds.
5. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 113
Netflix, Inc. (NASDAQ:NFLX), an American online media service, reported addition of 183 million global subscribers in Q1 of 2020, fueled by the Covid-related lockdowns. The company is also foraying into gaming business to offset the competition in the streaming industry.
Chicago-based Citadel Investment Group is the leading shareholder of Netflix, Inc. (NASDAQ:NFLX), with shares worth $2.4 billion. Overall, 113 hedge funds tracked by Insider Monkey were bullish on the stock in Q2, valued at over $13.2 billion. In the previous quarter, 110 hedge funds had positions in Netflix, Inc. (NASDAQ:NFLX), which highlights the positive hedge fund sentiment.
On October 15, Benjamin Swinburne of Morgan Stanley lifted the firm’s price target on Netflix, Inc. (NASDAQ:NFLX) to $675, while maintaining an Overweight rating on the shares. The stock gained 21.02% in 2021.
Polen Capital mentioned Netflix, Inc. (NASDAQ:NFLX) in its Q1 2021 investor letter. Here is what the firm has to say:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
