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Giant Eyes for this Internet Television Giant - Sanford J. Colen Continues Long in Netflix
Posted by: Victor Selva (IP Logged)
Date: February 15, 2014 09:33AM
Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings filed by institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC). These investors include banks, insurance companies, hedge funds, investment companies, foundations and pension funds. Form 13-Fs only report long positions. Remember that short positions are not required to be disclosed and are not reported.
In this article, let's concentrate in one particular hedge fund and try to see the principal changes in its portfolio. I will look into a San Francisco-based long/short equity hedge fund, Sanford J. Colen’s Apex Capital and we will take a look at the principal long positions.
The hedge funds' AUM is almost $1 billion according to Bloomberg's data and the portfolio´s distribution across sectors is as follows:
We have to mention that two sectors were reduced from last quarter: Energy and Industrials, while Consumer Discretionary, Health Care, Information Technology and Materials were increased compared to the previous quarter.
Now, let's take a look at Apex’s most valuable assets. The fund is most bullish about Netflix Inc. (NFLX) with a market value of $69.7 million and representing 7.3% of the total portfolio. The firm obtains content from studios and other providers through streaming license agreements, DVD direct purchases and DVD revenue sharing agreements, and we still see this as a key driver for the company´s performance. Over the past year Netflix's earnings growth was tremendous and the stock price has surged by 121.2%. As a matter of fact, most analysts continue to recommend buying this stock, and Mr. Colen continues betting on it. The top five holders of the stock are: Capital Research Global Investor, T Rowe Price Associates, Vanguard Group Inc., Icahn Associates Corp. and State Street Global ADV.
The second place was occupied by MicroStrategy Incorporated (MSTR), a provider of business intelligence and mobile software with 5.5% of the total portfolio and worth $52.6 million. It reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago, and the stock price outperformed the rise in the S&P 500.
Lastly, Actavis PLC (ACT) occupied the third place in Apex's portfolio by the end of the quarter. The firm is a $32 billion market cap specialty pharmaceutical company. This stock was added to the fund´s portfolio in the last quarter, and is Apex's largest new buy of the period. Its shares are currently valued at $52.1 million.
Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity.
Although ROEs between 15% and 20% are generally considered good, we can highlight the ratio of MicroStrategy that beats the industry mean, while the two other companies have not.
In the next chart we can appreciate that considering the stock price movement in the current year, the three of them have an upward trend.
To concentrate in one stock, hedge fund gurus have also been active in Netflix. Ron Baron (Trades, Portfolio), Jim Simons (Trades, Portfolio), Chase Coleman (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) have also invested in it.
The three stocks are certainly attractive for fundamental investors and make them a worthy investment for Mr. Colen's portfolio. Maybe for you they are as well.
Disclosure: Victor Selva holds no position in any stocks mentioned.
Guru Discussed: Chase Coleman: Current Portfolio, Stock Picks
Jeremy Grantham: Current Portfolio, Stock Picks
Stocks Discussed: NFLX, MSTR, ACT,