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Why Sony (SNE) Is A Compelling Investment Case

If you are looking for the best ideas for your portfolio you may want to consider some of Third Point’s  top stock picks. Third Point, an investment management firm, is bullish on Sony Corp (NYSE:SNE) stock. In its Q4 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Sony Corp (NYSE:SNE) stock. Sony Corp (NYSE:SNE) is one of the best-known names in consumer electronics. The stock is up 0.1% since the Third Point’s pitch in January 2020. On a year-to-date basis, Sony Corp (NYSE:SNE) stock has risen by 3.9%.

On January 31, 2020, Third Point had released its Q4 2019 Investor Letter. Third Point said that Sony Corp (NYSE:SNE) stock can provide massive upside ahead.

For the quarter ended December 31st, 2019, Third Point Offshore fund recorded a return of 3.9%, compared to 9.1% of the S&P 500 Index. This brings its 2019 full-year return to 17.1%, compared to 31.5% of the S&P 500 Index.

Let’s take a look at comments made by Third Point about Sony Corp (NYSE:SNE) in the letter.

“We invested in Sony in Q1 2019 when shares traded down on market fears that cloud gaming posed a substantial threat to the company’s PlayStation franchise and overall gaming business. While the market saw only risks, we saw an incredible collection of media assets: the world’s largest video game platform, a top-three music label, and a top-five Hollywood film studio. Hidden behind the media empire was an underappreciated, best-in-class semiconductor business. We also saw a capable management team open to improving shareholder value and willing to listen to our suggestions about how the company could reach its full potential.

As is often the case with conglomerates, concerns over a single business impaired total value, giving us the opportunity to purchase shares at a large discount to our view of intrinsic valuation. The rest of 2019 proved excellent for Sony. Fears around cloud gaming were overblown. Sony’s semiconductor business has grown from ~15% of profits to ~25% and analysts expect semis to be a core driver of Sony’s growth going forward. Gaming profits were down only slightly ahead of a major product launch this holiday season, the PS5, after which most analysts expect Sony gaming to return to growth.

While business performance has been stellar, we believe true value maximization at Sony is only beginning. Out of Sony’s four major non-core publicly listed stakes, the company has divested only one of its smallest, Olympus. Sony has yet to outline a clear strategy for its remaining ~$14 billion in public stakes, largely concentrated between Sony Financial and M3, but has indicated that it will do so. Sony has avoided the topic of portfolio optimization, but we continue to believe that Sony’s media and semiconductors franchises can stand alone and create more value independently than together.”

In Q1 2020, the number of bullish hedge fund positions on Sony Corp (NYSE:SNE) stock increased by about 8% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Sony’s growth potential. Our calculations showed that Sony Corp (NYSE:SNE) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 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

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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