Is Unity Software (U) a Smart Long-Term Buy?

ClearBridge Investments, an investment management firm, published its “Aggressive Growth Strategy” first quarter 2022 investor letter – a copy of which can be downloaded here. The ClearBridge Aggressive Growth Strategy outperformed its Russell 3000 Growth Index benchmark in the first quarter. On an absolute basis, the Strategy had losses across six of the seven sectors in which it was invested (out of 11 sectors total). The lone contributor to performance was the materials sector while the primary detractors were in the information technology (IT) and communication services sectors. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, ClearBridge Investments Aggressive Growth Strategy mentioned Unity Software Inc. (NYSE:U) and explained its insights for the company. Founded in 2004, Unity Software Inc. (NYSE:U)  is a San Francisco, California-based video game software development company with a $26.2 billion market capitalization. Unity Software Inc. (NYSE:U)  delivered a -37.67% return since the beginning of the year, while its 12-month returns are down by -12.55%. The stock closed at $89.13 per share on April 14, 2022.

Here is what ClearBridge Investments Aggressive Growth Strategy has to say about Unity Software Inc. (NYSE:U) in its Q1 2022 investor letter:

“We took advantage of a correction in higher-multiple stocks early in the first quarter to purchase shares of Unity Software (NYSE:U), a leading platform to create, run and monetize 3D content. With about 1.6 million monthly active creators versus roughly 15 million potential content creators in gaming alone, we believe the company’s Create Engine is still underpenetrated relative to its core addressable market. We similarly see a long runway for growth in Unity’s Operate Solutions segment given its advertising network commands single-digit share of the $60 billion mobile app install ad market today. Furthermore, we believe Unity is well-positioned to expand its addressable market to include industries beyond gaming, on both the operate and create sides of their business. The company is not yet free cash flow positive but given strong net expansion rates and high gross margins, we see a path to improving profitability over time, with management notably targeting positive free cash flow this fiscal year.”

IT Support Specialist, software


Our calculations show that Unity Software Inc. (NYSE:U) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Unity Software Inc. (NYSE:U) was in 36 hedge fund portfolios at the end of the first quarter of 2022. Unity Software Inc. (NYSE:U) delivered a -23.55% return in the past 3 months.

In April 2022, we published an article that includes Unity Software Inc. (NYSE:U) in the 5 Software Stocks to Buy Now According to Jim Davidson’s Silver Lake Partners. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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