Is Magnite (MGNI) a Smart Long-term Buy?

Choice Equities Capital Management recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 35% (net) for the quarter, outperforming its benchmark, the S&P 500 Index which returned 8.9% in the same quarter. You should check out Choice Equities Capital Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q3 2020 Investor Letter, Choice Equities Capital Management highlighted a few stocks and Magnite Inc. (NASDAQ:MGNI) is one of them. Magnite Inc. (NASDAQ:MGNI) is an online advertising company. Year-to-date, Magnite Inc. (NASDAQ:MGNI) stock gained 129.8% and on December 14th it had a closing price of $18.75. Here is what Choice Equities Capital Management said:

“MGNI – Magnite shares have mostly treaded water of late and seem to have been treated as a bit of an afterthought. Perhaps prospective investors have been turned off by the name change from The Rubicon Project. Maybe there is some angst over the coming implementation of various privacy initiatives and their effect on the digital advertising ecosystem. Or it could be that the post-merger consolidated financials and short but steep drop in digital ad spend which drove EBITDA briefly negative for 2Q 2020 mean the company does not screen as particularly attractive at the moment.

However, the merger with Telaria, Inc. looks like a good one. With it, MGNI gets a leading position in the Connected TV market, the fastest growing segment of the digital advertising space, as management integrates a company with well-regarded functionalities and an industry leading customer list. Together, the company now becomes the leading supply side platform (SSP) and the only player of real scale in each of the CTV, audio, mobile and desktop formats. As publishers continue to consolidate their relationships with advertising partners down to just a handful of platforms (i.e. supply path optimization), Magnite’s offering as a true independent and objective omnichannel player positions the company as one of just a few likely winners. Though this share gain opportunity has been coming into focus for a while now, it is nice to see that their customers agree, as Disney and Hulu recently reiterated they were using Magnite for exactly these reasons.

As a share-gainer in an industry likely to grow at low double-digit growth rates or better, the company looks set to generate impressive growth in revenues and cash flows. Though trailing-twelve-month financials may not convey the message for now, the merger looks like the latest in a series of sound, strategic maneuvers by Magnite CEO Michael Barrett. For a company with an impressive management team, a good balance sheet and a bit of scarcity value as the only public SSP, valuation of just ~3x next year’s likely revenues seems quite compelling.”

In Q2 2020, the number of bullish hedge fund positions on Magnite Inc. (NASDAQ:MGNI) stock increased by about 9% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in Magnite’s growth potential. Our calculations showed that Magnite Inc. (NASDAQ:MGNI) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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