U.S. Markets open in 5 hrs 48 mins

Were Hedge Funds Right About Their Ultra Bullish Stance On Netflix, Inc. (NFLX)?

  • Oops!
    Something went wrong.
    Please try again later.
Debasis Saha
·6 min read
  • Oops!
    Something went wrong.
    Please try again later.

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Netflix, Inc. (NASDAQ:NFLX).

Netflix, Inc. (NASDAQ:NFLX) investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. Netflix, Inc. (NASDAQ:NFLX) was in 116 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 114. This means the bullish number of hedge fund positions in this stock reached a brand new all time high. Our calculations also showed that NFLX ranked #14 among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Bill Miller
Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a glance at the recent hedge fund action surrounding Netflix, Inc. (NASDAQ:NFLX).

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

Heading into the first quarter of 2021, a total of 116 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 114 hedge funds with a bullish position in NFLX a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NFLX A Good Stock To Buy?
Is NFLX A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Netflix, Inc. (NASDAQ:NFLX). Fisher Asset Management has a $1.9995 billion position in the stock, comprising 1.5% of its 13F portfolio. The second most bullish fund manager is Lone Pine Capital, with a $1.3259 billion position; 4.8% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions comprise Karthik Sarma's SRS Investment Management, David Goel and Paul Ferri's Matrix Capital Management and Boykin Curry's Eagle Capital Management. In terms of the portfolio weights assigned to each position SRS Investment Management allocated the biggest weight to Netflix, Inc. (NASDAQ:NFLX), around 21.87% of its 13F portfolio. Matrix Capital Management is also relatively very bullish on the stock, dishing out 11.7 percent of its 13F equity portfolio to NFLX.

As one would reasonably expect, some big names have jumped into Netflix, Inc. (NASDAQ:NFLX) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, established the most valuable position in Netflix, Inc. (NASDAQ:NFLX). Melvin Capital Management had $216.3 million invested in the company at the end of the quarter. Zach Schreiber's Point State Capital also made a $131.9 million investment in the stock during the quarter. The following funds were also among the new NFLX investors: Jeff Lignelli's Incline Global Management, Bill Miller's Miller Value Partners, and Brennan Diaz's Fernbridge Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Netflix, Inc. (NASDAQ:NFLX) but similarly valued. These stocks are The Coca-Cola Company (NYSE:KO), NIKE, Inc. (NYSE:NKE), Pinduoduo Inc. (NASDAQ:PDD), Toyota Motor Corporation (NYSE:TM), Novartis AG (NYSE:NVS), Merck & Co., Inc. (NYSE:MRK), and ASML Holding N.V. (NASDAQ:ASML). This group of stocks' market values match NFLX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KO,62,24683372,2 NKE,82,6285513,7 PDD,54,10528058,20 TM,11,797163,-1 NVS,23,1680463,-2 MRK,82,7171072,2 ASML,30,2976227,7 Average,49.1,7731695,5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.1 hedge funds with bullish positions and the average amount invested in these stocks was $7732 million. That figure was $15633 million in NFLX's case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Netflix, Inc. (NASDAQ:NFLX) is more popular among hedge funds. Our overall hedge fund sentiment score for NFLX is 93.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately NFLX wasn't nearly as successful as these 30 stocks and hedge funds that were betting on NFLX were disappointed as the stock returned 2.5% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Get real-time email alerts: Follow Netflix Inc (NASDAQ:NFLX)

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

Related Content