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 Netflix Inc (NASDAQ:NFLX) is one of them. Netflix is an online video streaming service provider based in California. Year-to-date, Netflix stock gained 34.1% and on April 21st it had a closing price of $433.83. Its market cap is of $190.4 billion, and NFLX is trading at a price-to-earnings ratio of 87.78x. Here is what Jake DuBois said:
“The effect on Netflix’s business is fairly straightforward, assuming that most of the readers of this are currently stuck at home with plenty of time to watch Tiger King and Love is Blind (hit shows on Netflix), so we won’t spend too much time here. Investors expected relatively flat US subscriber (sub) growth for 2020 as recently as a month ago, and those estimates will have to be significantly increased. Since the epidemic is global, the same dynamics are occurring worldwide, a boon for their international business. Additionally, studios are being forced to halt production of new content, which disproportionately hurts Netflix’s rivals due to Netflix’s enormous current library content advantage. Lastly, the lack of sports on television is another strong positive. We’ve seen over and over that once subscribers enter the Netflix funnel, the service is very sticky.”
Hedge funds are bullish on Netflix stock. The hedge funds have been buying the stock since the end of September 2019 (see the chart here).
Blue Hawk Investment Group’s comments on Electronic Arts
In the said letter, Jake DuBois also highlighted Electronic Arts Inc. (NASDAQ:EA) stock. Electronic Arts is a video game company based in California. Here is what Jake DuBois said:
“Anyone who has a kid does not need me to tell them that video game stocks are positioned well (and these trends are exciting), but more germane to this exercise is the balance of video game sales between digital and physical channels. For every video game that a gamer digitally purchases/downloads (think iTunes versus CDs), Electronic Arts makes 20%-25% more profit due to the absence of manufacturing costs and inventory costs. We estimate the current mix is still about 60% physical disc and we believe the current environment will accelerate this one-way shift. Just as people will not start buying CDs again, this behavior is unlikely to revert. At 16.5x Fiscal Year +1 EV/FCF and 16% of the market cap in net cash on the balance sheet, we think EA is in for a big year.”
Jake DuBois is bullish about Electronic Arts but hedge funds have been getting out of EA since the end of September 2019 (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.
