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 Charter Communications Inc. (NASDAQ:CHTR) is one of them. Charter is a mass media company that offers traditional pay-TV and broadband services. Year-to-date, Charter stock gained 2.17% and on April 21st it had a closing price of $490.78. Its market cap is of $116.2 billion, and CHTR is trading at a price-to-earnings ratio of 66.59x. Here is what Jake DuBois said:
“Charter Communications is the second largest cable operator in the U.S. (and a late 2019 buy that we had not previously disclosed). Current conditions should accelerate the trend of cord cutting, as consumers face an uncertain period with no live sports, but this alone is unlikely to materially impact Charter’s overall profitability – video margins are thin, and internet revenue increases when not bundling with video. But Charter is poised to benefit from the second-order effects of this move toward consuming media over the internet. The large cable companies recently completed a massive network upgrade to accommodate significantly higher speeds – critical for consumers that are streaming and gaming more over the internet (and connecting more devices) as they spend more time at home. Customers getting their internet from DSL/telecom providers are likely to find their speeds unacceptable in this new normal, and Charter is poised to benefit from its speed advantage over its direct competitors (since cable companies rarely compete directly in the same localities). Charter’s price fell over 30% from the high in February to the low in March, before bouncing back 17% over the last two weeks of the quarter. We added to the position as the price fell.”
Hedge funds have been selling Charter stock since the beginning of 2019 (see the chart here).
Blue Hawk Investment Group’s comments on STZ
In the said letter, Jake DuBois also highlighted Constellation Brands Inc. (NYSE:STZ) stock. Constellation Brands is international producer and marketer of beer, wine and spirits. Here is what Jake DuBois said:
“Constellation Brands is a slow and steady grower and one of the rare growth stories in Consumer Staples, meant to provide a cushion for the portfolio in more defensive markets. Plain and simple, people drink more beer in downturns, and Constellation Brands has some very positive longer-term demographic tailwinds driving long-term growth. Mid-month, when we provided our performance update, the stock was down 40%, very concerning to us given its role in the portfolio. We dove deep to determine what was driving the decline, and we could find nothing fundamental that meaningfully changed our estimate of long-term value. With our conviction intact, we bought more in the month, and the stock has bounced back about 40% since then, although it is still down 22% on the year. STZ is still significantly undervalued in our view, especially in this environment, and we believe it is positioned very well over the near, intermediate, and longer terms.
STZ’s P/E NTM:3 July 2015: 22.6x July 2016: 25.2x July 2017: 22.9x July 2018: 23.2x Today: 16.7x”
In Q4 2019, the number of bullish hedge fund positions on STZ stock increased by about 13% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.
