Netflix, Inc. (NFLX) Fell Out Of Favor With Hedge Funds

In this article we will check out the progression of hedge fund sentiment towards Netflix, Inc. (NASDAQ:NFLX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Netflix, Inc. (NASDAQ:NFLX) a buy right now? The best stock pickers were getting less bullish. The number of long hedge fund bets dropped by 7 in recent months. Netflix, Inc. (NASDAQ:NFLX) was in 106 hedge funds’ portfolios at the end of September. The all time high for this statistic is 116. Our calculations also showed that NFLX ranked 15th among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 113 hedge funds in our database with NFLX holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the key hedge fund action surrounding Netflix, Inc. (NASDAQ:NFLX).

Do Hedge Funds Think NFLX Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 106 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. By comparison, 104 hedge funds held shares or bullish call options in NFLX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Netflix, Inc. (NASDAQ:NFLX) was held by Citadel Investment Group, which reported holding $2633.4 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $2539.4 million position. Other investors bullish on the company included Eagle Capital Management, Matrix Capital Management, and SRS Investment Management. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to Netflix, Inc. (NASDAQ:NFLX), around 13.89% of its 13F portfolio. Blacksheep Fund Management is also relatively very bullish on the stock, designating 13.76 percent of its 13F equity portfolio to NFLX.

Since Netflix, Inc. (NASDAQ:NFLX) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds who sold off their positions entirely heading into Q4. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of the 750 funds watched by Insider Monkey, totaling about $208.3 million in stock, and Gavin Baker’s Atreides Management was right behind this move, as the fund dumped about $102.2 million worth. These transactions are interesting, as total hedge fund interest fell by 7 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Netflix, Inc. (NASDAQ:NFLX). We will take a look at salesforce.com, inc. (NYSE:CRM), Comcast Corporation (NASDAQ:CMCSA), Royal Dutch Shell plc (NYSE:RDS), Exxon Mobil Corporation (NYSE:XOM), Toyota Motor Corporation (NYSE:TM), Pfizer Inc. (NYSE:PFE), and Oracle Corporation (NYSE:ORCL). This group of stocks’ market valuations are closest to NFLX’s market valuation.

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As you can see these stocks had an average of 61.6 hedge funds with bullish positions and the average amount invested in these stocks was $5308 million. That figure was $14759 million in NFLX’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 10 bullish hedge fund positions. Netflix, Inc. (NASDAQ:NFLX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NFLX is 87.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately NFLX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NFLX were disappointed as the stock returned 5.2% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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