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Is Electronic Arts (EA) a Smart Long-term Buy?

Alex Smith
·3 min read

Generation PMCA recently released its Q3 2020 Investor Letter. The fund is managed by co-founders Randall Abramson and Herb Abramson. The investment firm serves its clients through two distinct areas: Portfolio Management and Capital Advisory services. You should check out Generation PMCA's top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Generation PMCA highlighted a few stocks and Electronic Arts Inc. (NASDAQ:EA) is one of them. Electronic Arts Inc. (NASDAQ:EA) is a video game company. Year-to-date, Electronic Arts Inc. (NASDAQ:EA) stock gained 13.4% and on November 20th it had a closing price of $121.87. Here is what Generation PMCA said:

"Electronic Arts is one of the largest video game developers and publishers with a collection of premium franchises. The stock recently sold off due to mixed results in several titles, even though strong growth was evident in other core franchises. We expect video game utilization to remain high, and the new console cycle should provide a near and medium-term boost. Several new titles are expected to be released next year, with incremental growth from cross-platform integration. The company is transitioning towards a higher margin digital-first model, supported by emerging sources of value in cloud gaming and eSports—a vertical that has become professionalized with a huge expanding global audience. Its strong market shares and depth of IP place Electronic Arts at the centre of this growth. The emergence of 5G and modern gaming consoles should take cloud gaming into the mainstream while competition and regulatory scrutiny are ongoing risks. Our FMV is $170. The company obviously believes its shares are undervalued too, recently authorizing a new $2.6 billion share repurchase program."

Last month, we published an article revealing that Melqart Asset Management firm sold Electronic Arts Inc. (NASDAQ:EA) stock in the second quarter of 2020.

In Q2 2020, the number of bullish hedge fund positions on Electronic Arts Inc. (NASDAQ:EA) stock decreased by about 8% from the previous quarter (see the chart here), so a number of other hedge fund managers don't believe in Electronic Arts' growth potential. Our calculations showed that Electronic Arts Inc. (NASDAQ:EA) 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

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