Oakmark Funds, an investment management firm, published its “Bill Nygren Market Commentary” fourth-quarter 2021 investor letter – a copy of which can be seen here. In the letter, Bill Nygren talked about Oakmark’s view on cryptocurrency, and why Oakmark calls itself a value investor. They also talked about the current investment opportunity, as well as how they differ from other investment firms. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Oakmark Funds’ Bill Nygren Commentary, in its Q4 2021 investor letter, mentioned Netflix, Inc. (NASDAQ: NFLX) and discussed its stance on the firm. Netflix, Inc. is a Los Gatos, California-based production company with a $237.9 billion market capitalization. NFLX delivered a -10.83% return since the beginning of the year, while its 12-month returns are up by 5.80%. The stock closed at $537.22 per share on January 12, 2022.
Here is what Oakmark Funds’ Bill Nygren Commentary has to say about Netflix, Inc. in its Q4 2021 investor letter:
“Oakmark was one of the first value managers to acknowledge that accounting rules overly penalize the companies investing to grow their businesses. Thirty years ago, we were buying cable TV companies that lost money every year and had negative book value. Why? Because we saw an active private market for cable TV companies at about $1000 per subscriber, which was much more than their stocks implied. The income statement was charging these companies for 100% of their investment in acquiring subscribers even though subscribers tended to remain for many years. Further, the depreciation expense for underground cable was based on a much shorter useful life than the assets actually had. When we adjusted the income statements, the substantial profitability of the industry became apparent.
We see a strong analogy to Netflix today, where we adjust the income statement for customer acquisition cost and the strategic underpricing of its subscriptions. For Alphabet, we add back its research spending on Waymo and “other bets” and add an asset for the value of those money-losing ventures. We also value cash separate from the business because if you valued cash at a normal P/E today, you’d be valuing it at pennies on the dollar. When we make our adjustments to Alphabet’s financials, we own its wonderful search business at less than the S&P multiple, which we consider to be a bargain.”
Photo by Thibault Penin on Unsplash
Our calculations show that Netflix, Inc. (NASDAQ: NFLX) ranks 15 on our list of the 30 Most Popular Stocks Among Hedge Funds. NFLX was in 106 hedge fund portfolios at the end of the third quarter of 2021, compared to 113 funds in the previous quarter. Netflix, Inc. (NASDAQ: NFLX) delivered a -14.69% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on NFLX in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
