RGA Investment Advisors LLC, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. The fund encouraged existing and prospective clients alike that despite the pains of the past decade, investments in high-quality and reasonably priced equities were well-timed and would be rewarded in the years to come. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
RGA Investment Advisors, in its Q4 2021 investor letter, mentioned Dropbox, Inc. (NASDAQ:DBX) and discussed its stance on the firm. Founded in 2007, Dropbox, Inc. (NASDAQ:DBX) is a San Francisco, California-based smart workspace company with an $8.7 billion market capitalization, and is currently spearheaded by its CEO, Drew Houston. Dropbox, Inc. (NASDAQ:DBX)delivered a -6.11% return since the beginning of the year, while its 12-month returns are down by -15.67%. The stock closed at $23.04 per share on March 18, 2022.
Here is what RGA Investment Advisors has to say about Dropbox, Inc. (NASDAQ:DBX) in its Q4 2021 investor letter:
“Dropbox really let us down this quarter, not because they did anything wrong, but because during our entire tenure holding this stock, it outperformed in periods where long duration assets (aka higher growth) sold off. This time it did not. Despite people asserting this market bifurcation is about selling growth and buying value, Dropbox shares suffered one of their worst stock market quarters in recent years. It’s hard to identify a specific reason, though one story out there is how some investors thought the company could raise the bar on its 30% targeted operating margin upon achieving those levels. Along with the company’s earnings report, instead of raising the bar, they explained how there is more room to drive margin, but in the mean-time the preference at the company is for investing the potential excesses to drive further growth.
This year, the company will have repurchased nearly 9% of its diluted shares outstanding (perhaps more given the Q4 route in shares) and will have delivered a free cash flow yield upwards of 7.5% on its year-end stock price, while growing upwards of 12%. This is a potent recipe for outstanding returns, yet in a market that’s theoretically seeking cash flow, the stock was punished. We think this is one of the most nonsensical moves of them all and find Dropbox to be an especially compelling opportunity heading into 2022. The top line is certainly growing, as the company continues to withstand competition from Microsoft, Google and Box. Plus management continues to make smart tuck-in acquisition, showing what may emerge as a scalable, repeatable recipe for deepening their relationship with existing customers, thus driving down churn and setting the stage for prolonged ARPU growth. This potential strategy started with HelloSign, and is further validated with the acquisition of DocSend…” (Click here to see the full text)
Photo by Annie Spratt on Unsplash
Our calculations show that Dropbox, Inc. (NASDAQ:DBX) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Dropbox, Inc. (NASDAQ:DBX) was in 44 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 41 funds in the previous quarter. Dropbox, Inc. (NASDAQ:DBX) delivered a -3.52% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on Dropbox, Inc. (NASDAQ:DBX) 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.
