Aristotle Capital Management, an independent/employee-owned investment management organization, published its “Global Equity Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Aristotle Capital’s Global Equity Composite posted a total U.S. dollar return of -9.19% gross of fees (-9.28% net of fees), compared to the MSCI World Index, which returned -5.15%, and the MSCI ACWI Index, which returned -5.36%. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Aristotle Capital Management Global Equity mentioned Dolby Laboratories, Inc. (NYSE:DLB) and explained its insights for the company. Founded in 1965, Dolby Laboratories, Inc. (NYSE:DLB) is a San Francisco, California-based audio and imaging products designer and manufacturer with a $7.6 billion market capitalization. Dolby Laboratories, Inc. (NYSE:DLB) delivered a -20.01% return since the beginning of the year, while its 12-month returns are down by -21.14%. The stock closed at $76.17 per share on May 26, 2022.
Here is what Aristotle Capital Management Global Equity has to say about Dolby Laboratories, Inc. (NYSE:DLB) in its Q1 2022 investor letter:
“Founded in 1965 and headquartered in San Francisco, Dolby Laboratories designs and manufactures audio and visual products. Its technology makes images brighter, colors further refined and the audio experience more immersive by providing an enhanced ability to pinpoint the placement and volume of specific sounds. Products that utilize Dolby’s technology span both commercial and home theaters, televisions, sound bars, computers and mobile devices.
The company partners with music artists, movie directors and other content creators, teaching them how to properly leverage Dolby’s suite of products to create next-generation productions. Dolby generates revenue by licensing its technologies to software vendors and over 500 electronics manufacturers, the likes of which include Sony (SONY), Microsoft (MSFT), Samsung (OTC:SSNLF) and Apple (AAPL). The company’s end markets consist of Broadcast (39% of licensing revenue), Mobile (22%), Consumer Electronics (15%), PC (12%) and Other (12%).
High-Quality Business
Some of the quality characteristics we have identified for Dolby Laboratories include:
- Decades-long market leadership in a near-monopolistic environment, as Dolby’s technologies are widely considered industry standards. For example, Dolby has won the format war in spatial audio with Dolby Atmos and for hi-def with Dolby Vision;
- Pricing power and “sticky” customers, since licensing for Dolby’s technology represents a very low percentage of a product’s total cost but is critical to a customer’s buying decision; and
- Its 10,000+ patents, the very complex nature of its technology and its already firmly in place network effects create high barriers to entry for would-be competition.
Attractive Valuation
We believe shares of Dolby Laboratories are undervalued by the market given our estimates of higher normalized FREE cash flow from expanded adoption of its product suite and growing addressable market.
Compelling Catalysts
Catalysts we have identified for Dolby Laboratories, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:
- Continued market share gains for Dolby Atmos and Dolby Vision, as more OEMs prioritize quality of sound and visuals in devices (TVs, phones, headsets, tablets, PCs, videogames, etc.); and
- Further adoption of Dolby.io, a platform that enables software developers to improve audio files and enhance communications experiences within their applications. Dolby.io has already seen a climb in use cases across entertainment, online education and telehealth.”
Dolby, Music
Our calculations show that Dolby Laboratories, Inc. (NYSE:DLB) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Dolby Laboratories, Inc. (NYSE:DLB) was in 22 hedge fund portfolios at the end of the first quarter of 2022, compared to 26 funds in the previous quarter. Dolby Laboratories, Inc. (NYSE:DLB) delivered a 0.44% return in the past 3 months.
In December 2021, we published an article that includes Dolby Laboratories, Inc. (NYSE:DLB) in the 10 Dividend Stocks to Buy According to Billionaire Michael Price’s MFP Investors. 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.
