Is Netflix (NFLX) A Great Buy?

Tollymore Investment Partners, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. Year-to-date, the Fund has returned 9%, underperforming its MSCI ACWI benchmark that delivered an 11% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

FPA U.S. Core Equity Fund, in its Q3 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 $272.0 billion market capitalization. NFLX delivered a 13.57% return since the beginning of the year, while its 12-month returns are up by 19.48%. The stock closed at $614.09 per share on December 24, 2021.

Here is what FPA U.S. Core Equity Fund has to say about Netflix, Inc.  in its Q3 2021 investor letter:

“Around the same time as the Innovator’s Dilemma was published, Netflix launched its DVD-by-mail business. One of the cornerstones of Netflix’s proposition was a promise not to charge late fees. The incumbent, Blockbuster generated 16% of its revenue from this highly lucrative activity. With slender operating margins, like mid-tier gyms, Blockbuster had nowhere to go. Hamilton Helmer has referred to this as ‘counter-positioning’. Counter-positioning occurs when the NPV challenger strategy is positive for the challenger but negative for the incumbent. Counter positioning, rather than managerial incompetence or technological inferiority, is responsible for Blockbuster taking seven years to launch a DVD-by-mail business. Adopting the challenger model becomes rational when the incumbent’s core business has shrunk enough to make this a value accretive activity.”

Pixabay/Public Domain

Based on our calculations, Netflix, Inc. (NASDAQ: NFLX) ranks 15th in 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 3.51% return in the past 3 months.

In October this year, we also shared another hedge fund’s views on NFLX in another article. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q3 page.

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