Polen Capital, an investment management firm, published its “Polen Focus Growth” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 1.81% was delivered by the fund for the Q1 of 2021, outperforming its Russell 1000 Growth benchmark that delivered a 0.95% return, but below the S&P 500 Index that had a 6.18% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Polen Focus Growth Fund, in its Q1 2021 investor letter, mentioned Netflix, Inc. (NASDAQ: NFLX), and shared their insights on the company. Netflix, Inc. is a Los Gatos, California-based production company that currently has a $215.7 billion market capitalization. Since the beginning of the year, NFLX delivered a -10.00% return, while its 12-month gains are up by 7.15%. As of May 13, 2021, the stock closed at $486.66 per share.
Here is what Polen Focus Growth Fund has to say about Netflix, Inc. in its Q1 2021 investor letter:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
Our calculations show that Netflix, Inc. (NASDAQ: NFLX) ranks 14th in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Netflix, Inc. was in 116 hedge fund portfolios, compared to 104 funds in the third quarter. NFLX delivered a -12.55% return in the past 3 months.
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