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Why Wedgewood Partners is Bullish on NVIDIA (NVDA) and Electronic Arts (EA) Stocks?

Wedgewood Partners, a St. Louis, Missouri-based investment management firm, released its Q1 2020 Investor letter – a copy of which is available for download here. Wedgewood Partners returned -16.30% for the first quarter. Meanwhile, the benchmark Russell 1000 Growth Index and the S&P 500 Index lost 14.10% and 19.60%, respectively.

In the said letter, Wedgewood Partners highlighted a few stocks and Nvidia Corp (NASDAQ:NVDA) is one of them. Nvidia engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. Year-to-date, NVDA stock gained 26.8% and on April 29th it had a closing price of $298.46. Its market cap is of $182.8 billion. Here is what Wedgewood Partners said:

“NVIDIA actually finished the quarter with a positive absolute return as the Company reverted to solid revenue growth of +41% after a few quarters of declines. Most of the revenue growth was driven by rapid uptake of NVIDIA’s datacenter processors, especially for training natural language processing models that are being utilized for search engines, virtual personal assistant development, customer service chatbots, and other real-time conversational artificial intelligence (AI) applications. We think NVIDIA should continue to see strength in datacenter demand as well as gaming, despite the effects of COVID-19, but will monitor its valuation relative to opportunities that have more pessimistic embedded future growth assumptions.”

In Q4 2019, the number of bullish hedge fund positions on NVDA stock increased by about 41% from the previous quarter (see the chart here).

Wedgewood Partners comments on Electronic Arts

In the said letter, Wedgewood Partners also highlighted Electronic Arts Inc. (NASDAQ:EA) stock. Electronic Arts is a video game company based in California. Here is what Wedgewood Partners said:
“Electronic Arts held up relatively well though still finished in the red, as investors are anticipating the Company will benefit from increased video game consumption due to various public lockdowns that have dramatically reduced other available forms of entertainment. Several sources have noted video game consumption over the past several weeks has risen quite dramatically compared to year ago periods, with NVIDIA mentioning an over +50% increase in gaming hours seen on its installed base. The stock continues to trade at attractive multiples with several durable, growing franchises and a fortress balance sheet that should help sustain returns in this difficult economic environment.”

In Q4 2019, the number of bullish hedge fund positions on EA stock decreased by about 3% from the previous quarter (see the chart here).

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

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