Blue Hawk Investment Group, LLC is the management company of the Blue Hawk Fundamental Growth Fund, LP. Insider Monkey has recently published a copy of Blue Hawk Investment Group’s Q1 2020 investor letter. A copy of the letter can be downloaded here. Jake DuBois is the fund’s founder and managing member. The fund was founded in 2016. For Q1 2020, the fund reported a net return of -10.01%, while the S&P 500 returned -20.00%.
In the said letter, Jake DuBois highlighted a few stocks and Microsoft Corp (NASDAQ:MSFT) is one of them. Microsoft is a multinational technology company based in Washington.Year-to-date, Microsoft stock gained 6.4% and on April 21st it had a closing price of $167.82. Its market cap is of $1.3 trillion, and MSFT is trading at a price-to-earnings ratio of 29.23x. Here is what Jake DuBois said:
“Microsoft should be one of the big winners of the new normal. Their PC business has been the one drag on their growth, and we think there will be a surge in laptop demand as corporations better equip their employees for WFH, and schools ensure all students have laptops. This will doubly benefit Microsoft through increasing demand for their Office-based products. In addition, a more permanent WFH strategy reduces the need for in-house IT infrastructure, accelerating the shift to cloud computing and Software as a Service (SaaS). At 20x our ’21 GAAP EPS estimate and $8.50 a share in net cash on the balance sheet, we are very bullish on the stock.”
In Q4 2019, the number of bullish hedge fund positions on MSFT stock declined by about 1% from the previous quarter (see the chart here).
Blue Hawk Investment Group’s comments on MTCH
In the said letter, Jake DuBois also highlighted Match Group Inc. (NASDAQ:MTCH) stock. Match Group is an Internet company that owns and runs some of the most popular dating web sites like Tinder. Here is what Jake DuBois said:
“Large congregations of people will most likely be viewed with trepidation for the foreseeable future. This means there will likely be big changes to sporting events, concerts, and the bar scene. This is bad news for singles looking to meet people offline. But their drive to meet other singles is not going anywhere, which is good news for Match Group and their online dating funnel. Match Group noted in a press release on March 31 that conversations and engagement on Tinder and Hinge – Match’s two most popular apps – have increased between 10-30% in countries affected by the outbreak, which only reinforces our view that Match should be thought of as a social network, not a dating business. They noted that in countries with strong containment efforts, business has remained largely intact. They did note new user growth has slowed in areas most affected by the outbreak, noting New York, Italy, and Spain, and adding this is particularly true for users over 30 years of age. These dynamics are far from surprising given people have bigger issues to deal with in these areas. Overall, this release was a strong positive in our view indicating business as usual in areas with containment, and Match is additionally pushing forward improvements in video dating. The company also maintained the lower end of guidance, which we would estimate maybe 10% of public companies have done, and the stock proceeded to sell off 7.5% the following day to our surprise. Once people start online dating, the behavior is remarkedly sticky. The impetus to stop is usually their future spouse. At 20x ‘21 EV/FCF for one of the best combinations of growth, margins, and free cash flow generation, we think Match makes one heck of a bargain and we believe social distancing will only accelerate adoption as containment improves. In addition, we believe the pending spin-off has created an overhang for the stock, which we expect to pass within the next quarter or two.”
Do you think it was the appropriate time to buy MTCH stock?
Disclosure: None. This article is originally published at Insider Monkey.
