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Hedge Funds Are Resubscribing To Netflix, Inc. (NFLX)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Netflix, Inc. (NASDAQ:NFLX) based on that data and determine whether they were really smart about the stock.

Netflix, Inc. (NASDAQ:NFLX) has seen an increase in support from the world’s most elite money managers in recent months. The number of bullish hedge fund positions is near its all time high. Our calculations also showed that NFLX ranked #13 among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing Netflix, Inc. (NASDAQ:NFLX).

How are hedge funds trading Netflix, Inc. (NASDAQ:NFLX)?

At the end of June, a total of 113 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the first quarter of 2020. By comparison, 106 hedge funds held shares or bullish call options in NFLX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Netflix, Inc. (NASDAQ:NFLX). Fisher Asset Management has a $1.55 billion position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Karthik Sarma of SRS Investment Management, with a $1.3823 billion position; 25.7% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of Ken Griffin’s Citadel Investment Group, David Goel and Paul Ferri’s Matrix Capital Management and Boykin Curry’s Eagle Capital Management. In terms of the portfolio weights assigned to each position SRS Investment Management allocated the biggest weight to Netflix, Inc. (NASDAQ:NFLX), around 25.74% of its 13F portfolio. Voleon Capital is also relatively very bullish on the stock, designating 18.12 percent of its 13F equity portfolio to NFLX.

As aggregate interest increased, key money managers have jumped into Netflix, Inc. (NASDAQ:NFLX) headfirst. Voleon Capital, managed by Michael Kharitonov and Jon David McAuliffe, established the largest position in Netflix, Inc. (NASDAQ:NFLX). Voleon Capital had $43.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $32.1 million position during the quarter. The following funds were also among the new NFLX investors: Alok Agrawal’s Bloom Tree Partners, Josh Donfeld and David Rogers’s Castle Hook Partners, and Robert B. Gillam’s McKinley Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Netflix, Inc. (NASDAQ:NFLX) but similarly valued. We will take a look at NVIDIA Corporation (NASDAQ:NVDA), Exxon Mobil Corporation (NYSE:XOM), Comcast Corporation (NASDAQ:CMCSA), China Mobile Limited (NYSE:CHL), Adobe Inc. (NASDAQ:ADBE), Oracle Corporation (NYSE:ORCL), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market caps resemble NFLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVDA 92 5548398 -3
XOM 53 1114752 -12
CMCSA 80 7207135 -3
CHL 9 456289 -2
ADBE 104 9651462 -11
ORCL 49 2312027 1
NVO 24 3294368 0
Average 58.7 4226347 -4.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.7 hedge funds with bullish positions and the average amount invested in these stocks was $4.2 billion. That figure was $13.5 billion in NFLX’s case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Netflix, Inc. (NASDAQ:NFLX) is more popular among hedge funds. Our overall hedge fund sentiment score for NFLX is 93.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately NFLX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NFLX were disappointed as the stock returned 7.4% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.