FPA Queens Road, an investment management firm, published its “FPA U.S. Core Equity Fund” first-quarter 2022 investor letter – a copy of which can be downloaded here. In the first quarter of 2022, the FPA U.S. Core Equity Fund, Inc.’s (“Fund”) performance was -12.25% (-12.01% before fees and expenses). Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, FPA U.S. Core Equity Fund mentioned Activision Blizzard, Inc. (NASDAQ:ATVI) and explained its insights for the company. Founded in 2008, Activision Blizzard, Inc. (NASDAQ:ATVI) is a Santa Monica, California-based video game company with a $58.4 billion market capitalization. Activision Blizzard, Inc. (NASDAQ:ATVI) delivered a 12.30% return since the beginning of the year, while its 12-month returns are down by -18.34%. The stock closed at $74.71 per share on June 17, 2022.
Here is what FPA U.S. Core Equity Fund has to say about Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q1 2022 investor letter:
“One of the Fund’s biggest winners in the first quarter was Activision Blizzard. On January 18, 2022 Microsoft (NASDAQ:MSFT) agreed to purchase ATVI for $95.00 per share in an all-cash transaction. The Fund has been invested in ATVI since the second quarter of 2018.
The investment thesis was threefold. First, the greater than $200 billion gaming industry is the largest and fastest growing form of entertainment in the world. More than three billion people play games currently and the population of global gamers is expected to grow faster than global population growth this decade.14 Second, ATVI has some of the best intellectual property in the gaming industry including Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush in addition to global eSports activities through Major League Gaming. Third, ATVI has had a pristine balance sheet with net cash over the past four years, generated robust free cash flow and traded at an undemanding valuation.
ATVI closed the quarter at $80.11—a nearly 16% discount to the acquisition price. Assuming it takes about a year for the deal to close, a 18.6% return seems to be good upside relative to the risk of a deal not closing due to anti -trust concerns. If the transaction closes it would make Microsoft the third-largest company in gaming by revenue behind Tencent and Sony. There is plenty of competition from these larger players as well as smaller competitors such as EA, Take-Two Interactive, Roblox and Epic Games’ Fortnite. The Fund remains invested in ATVI given the significant discount, but should the discount narrow in the coming quarters the Fund could reduce or eliminate the position.”
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Our calculations show that Activision Blizzard, Inc. (NASDAQ:ATVI) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Activision Blizzard, Inc. (NASDAQ:ATVI) was in 80 hedge fund portfolios at the end of the first quarter of 2022, compared to 70 funds in the previous quarter. Activision Blizzard, Inc. (NASDAQ:ATVI) delivered a -5.14% return in the past 3 months.
In March 2022, we also shared another hedge fund’s views on Activision Blizzard, Inc. (NASDAQ:ATVI) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
