Kovitz Investment Group Partners, an investment management firm, published its “Kovitz Core Equity” first-quarter 2022 investor letter – a copy of which can be downloaded here. During the first quarter of 2022, the Kovitz Equity Composite (the “Composite”) decreased by 4.9%, net of all fees. By way of comparison, the S&P 500 was down 4.6% while the Russell 1000 Value Index fell 0.7% for the same period. 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, Kovitz Core Equity mentioned Spotify Technology S.A. (NYSE:SPOT) and explained its insights for the company. Founded in 2006, Spotify Technology S.A. (NYSE:SPOT) is a Stockholm, Sweden-based music streaming services provider with a $21.6 billion market capitalization. Spotify Technology S.A. (NYSE:SPOT) delivered a -52.08% return since the beginning of the year, while its 12-month returns are down by -61.72%. The stock closed at $112.14 per share on April 25, 2022.
Here is what Kovitz Core Equity has to say about Spotify Technology S.A. (NYSE:SPOT) in its Q1 2022 investor letter:
“Spotify is a pioneer in the music streaming business. The company has been largely responsible for returning the music industry to growth after years of decline that started when the rise of music-sharing service, Napster, began to decimate the sale of physical music media in the late 90’s. Spotify has also played a leading role in the transformation of the music industry into a more collaborative effort among artists, studios, and distributors. They are also quickly becoming the leading global podcasting platform. Over time, we expect their geographic expansion, market share gains, and development of an auction-supported ad network (similar to YouTube) to generate significant levels of free cash flow relative to the capital employed.
Spotify’s services are extremely well-liked by the vast majority of its customers as evidenced by an extremely low churn level among premium subscribers. We envision Spotify becoming the scaled leader in audio distribution, with the most options to monetize the ongoing shift from radio/physical sales to digital.
Current cash flow is likely depressed as Spotify is spending aggressively on R&D to continually improve the customer experience, building out an attractive lineup of exclusive podcasts, and marketing extensively to acquire premium subscribers. Looking further out however, our projections of normalized free cash flow levels support our view that shares of Spotify offer an attractive entry point to own one of the few platforms that can plausibly reach over 1 billion users (from a current base of roughly 400 million) as the company and industry mature.”
Photo by sgcdesignco on Unsplash
Our calculations show that Spotify Technology S.A. (NYSE:SPOT) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Spotify Technology S.A. (NYSE:SPOT) was in 53 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 48 funds in the previous quarter. Spotify Technology S.A. (NYSE:SPOT) delivered a -39.07% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Spotify Technology S.A. (NYSE:SPOT) 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.
