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“It is as if the mission of modernity was to squeeze every drop of variability and randomness out of life – with the ironic result of making the world a lot more unpredictable, as if the goddesses of chance wanted to have the last word.” – Nassim Nicholas Taleb, Antifragile: Things That Gain from Disorder
To Our Shareholders:
We hope this letter finds you and your loved ones safe, well and managing the best as can be expected in this crazy and difficult time. One important benefit of having been in the investment business now for 100 years is that
Coatue Management recently disclosed its portfolio updates for the first quarter of 2020, which ended on March 31.
Founded in 1999 and headquartered in New York, Coatue Management is an employee-owned private hedge fund sponsor. It launches and manages various hedge funds for clients and is perhaps best known for its tech-focused hedge fund. The firm mainly invests in U.S. and non-U.S. publicly traded equity securities, but it also has short positions and investments in private equity and hedging markets. Chief Investment Officer Philippe Laffont (Trades, Portfolio), who founded the firm after leaving Tiger Management, takes a
Appaloosa LP recently disclosed its portfolio updates for the first quarter of 2020, which ended on March 31.
Founded by David Tepper (Trades, Portfolio) and Jack Walton in 1993, Appaloosa is a New Jersey-based limited partnership hedge fund that specializes in distressed debt. The firm invests in public equity and fixed-income markets around the world and is famous for earning some of the highest returns on Wall Street since its founding. In terms of equity holdings, the firm invests in a small number of companies that are typically large-cap and hold strong competitive advantages.
Based on its
David Einhorn (Trades, Portfolio) is a hedge fund manager who is particularly well known for the short positions he has taken against a number of high-profile companies. In recent years, these have included Tesla (TSLA) and Netflix (NFLX). I believe that even investors who only deal on the long side can learn a lot by studying the short-selling process - after all, figuring out whether a business is too expensive requires much of the same skills and information as figuring out whether something is undervalued.
Anatomy of a short portfolio
So how does Einhorn decide
The current economic recession in the U.S. could lead to massive changes in how businesses operate in the future. In the past, economic downturns proved to be disastrous for all business sectors alike. This time around, though, a certain set of companies have weathered the storm better due to the nature of their business operations. For instance, online-oriented companies such as Amazon.com Inc. (AMZN), Netflix Inc. (NFLX) and Zoom Video Communications Inc. (ZM) have turned the dire economic conditions into an opportunity to gain traction. This characteristic will likely lead to dramatic changes in corporate America. The varying impact of
The Covid-19 viral pandemic that hit our shores in early 2020 shut down the economy to a virtual halt, and unemployment has skyrocketed to an estimated 19%, as 30 million people have now filed for unemployment benefits over the last six weeks (see chart below). Shockingly, we have not seen joblessness levels this high since the Great Depression. All this destruction has investors asking themselves, “What the heck, and what now?
The Dow Jones Industrial Average closed at 23,749.76 on Monday with a gain of 26.07 points or 0.11%. The S&P 500 closed at 2,842.74 for a gain of 12.03 points or 0.42%. The Nasdaq Composite closed at 8,710.71 for a gain of 105.77 points or 1.23%. The VIX Volatility Index was lower at 35.93 for a loss of 1.26 points or -3.39%.
Monday’s market movers
The major U.S. indexes ended higher Monday with gains capped by new U.S. and China tariff tensions. President Trump has threatened to impose new tariffs and other penalties for Chinese imports in retaliation for China’s
Netflix (NFLX) continues to enhance its long-term competitive position with the industry’s largest commitment of investment dollars in exclusive and original content. Given its still-low global penetration and the accelerating shift from linear TV, Netflix still has significant room for growth. We expect the ramp up in original shows with established audiences and new series will lead to a reacceleration in subscriber growth. In the fourth quarter, the company’s global subscriber base grew 20% to 167 million, and global average revenue per user increased roughly 9%. Global net subscriber additions, at 8.8 million, surpassed consensus expectations. In an expected
1st Quarter, 2020
“We have eliminated a handful of holdings that face headwinds created by the current uncertain environment that challenge our longer-term growth forecasts. Our efforts to upgrade quality at the margin is typical of the approach we have taken in past periods when the global outlook has been significantly challenged and uncertain.”
Jennison Associates LLC
Market in Review
The first quarter of 2020 was one of the most disconcerting periods in recent history, as the COVID-19 outbreak spread rapidly around the globe, disrupting markets and life virtually everywhere. By the end of the period, more than 900,000 cases
Since the fallout of the financial crisis, the largest companies listed on U.S. markets have provided the best returns. The likes of Facebook, Inc. (FB), Apple Inc. (AAPL) and Netflix Inc. (NFLX) were the drivers of the bull market that lasted a decade. There’s no denying that these companies have grown their earnings in leaps and bounds in this period, resulting in their stellar market performance.
Amid the chaos in global capital markets, the five largest companies representing the S&P 500 index have continued to establish their dominance. As illustrated below, the market capitalization of these companies now accounts for
This is the third article in my series about The Walt Disney Company (DIS). In the first article, I looked at the Parks, Experiences and Products business, as well as the Studio Entertainment business. I concluded that these segments are collectively worth somewhere in the range of $90 billion to $170 billion (before accounting for minority interests). In the second article, I provided an overview on the Media Networks segment, as well as the recent results in the Direct to Consumer (DTC) and International segment. I did not come to a definitive conclusion, so
Netflix Inc. (NFLX) reported earnings for the first quarter on April 21. Investors had been hoping for a big boost for the streaming video company thanks to the lockdowns and quarantines that have kept consumers indoors for more than a month.
As it turned out, the first quarter proved to be a mixed bag for Netflix. While the streaming giant surprised investors with strong subscriber growth, there may, upon closer inspection, be less than meets the eye to that particular beat.
Strong headline growth
Netflix reported a staggering 15.77 million net new subscriptions
How can one explain the unusual dispensation for one sector of the economy from the ravages of the sudden and economically devastating effects of the coronavirus when seemingly every other industry is untouched?
Prior to the lockdown, some analysts had been making a compelling case that many of the tech stocks, particularly some of the FAANG members, were reaching valuation levels that were simply inconsistent with present value discounting models. Skeptics might have anticipated that the current economic pain, thrust on every other business, would not have left the seemingly overvalued tech group untouched.
Instead, the group has been performing
Netflix (NFLX) released its first-quarter results on April 21 after the market closed. The streaming giant recorded earnings and revenue that grew year-over-year as stay-at-home orders led to stunning subscriber growth.
The company posted diluted earnings of $1.57 per share, which reflected a gain of 117.11% from the same quarter last year. Revenue of $5.77 billion climbed 27.65% on a year-over-year basis. Wall Street had predicted earnings of $1.65 per share on $5.76 billion in revenue.
In a letter to shareholders, the company commented on how Covid-19 has affected its earnings:
Shares of Netflix Inc. (NFLX) initially soared on the back of reporting first-quarter global paid subscriber additions close to twice that of consensus estimates. Despite this, the gains declined when the company warned that viewership might decline when governments start lifting shelter-in-place orders.
For the quarter ending March 30, the Los Gatos, California-based company reported 15.77 million in net new subscriptions, outperforming the FactSet estimate of approximately 8 million. Despite the high number of new subscriptions, revenue remained on par with management’s guidance due to the appreciation in the U.S. dollar versus other currencies, according to the company’s shareholder letter.
Recently, Barron’s magazine published a list of the top 10 stocks over the past decade, stocks that beat even Amazon.com Inc. (AMZN) and Google parent Alphabet Inc. (GOOG).
Third on that list was TransDigm Group Inc. (TDG) with a total return of 2,015% between Jan. 1, 2010 and Dec. 31, 2019. It was beaten by only two other companies, MarketAxess Holdings Inc. (MKTX) with a 3,015% return and Netflix Inc. (NFLX), which returned 3,693%.
Just a few months into the decade of the 2020s, though, the TransDigm share price has fallen dramatically:
Netflix Inc. (NFLX) has been on a tear recently. While the novel coronavirus epidemic has thrown many businesses into turmoil, investors evidently believe the near-total lockdown will serve as a tailwind for the streaming media giant. On April 14, the company’s stock actually surpassed its pre-crash price level.
The streaming giant is being driven by forward-looking enthusiasm bordering on irrational exuberance. Yet, before the Covid-19 outbreak, the company was already beginning to suffer from the collision of sky-high market expectations and a much more pedestrian reality. When the company reports earnings next week, those
I recently wrote an article that looked at the Studio Entertainment and the Parks, Experiences and Products segments of The Walt Disney Company (DIS). In the conclusion, I wrote, “I think you can make the case that these segments are collectively worth $90 billion to $170 billion.”
In this article, I will discuss my initial thoughts on the remaining businesses at Disney, including the Media Networks segment and the Direct to Consumer (DTC) and International segment. (I intended to address all of Media Networks and DTC in a single article, but that proved impractical.)
With cinemas, museums, restaurants and bars all shut down along with much of the rest of the real economy, consumers have had far fewer options for entertainment. With more people staying in, streaming video platforms are getting a considerable boost in viewers. Yet, while Netflix Inc. (NFLX) may be enjoying the lockdown life, a prominent Chinese streaming company, iQIYI Inc. (IQ), has taken a serious hit. Specifically, some accusations have appeared claiming that the company has been exaggerating its numbers. Thus, investors should approach this name with extreme caution.
Market volatility spiked during the first quarter of 2020 due to the considerable economic and social impact from the coronavirus. The Oakmark Fund declined 30% during the quarter, trailing the 20% decline for the S&P 500. Significant market volatility pushed share prices well below our estimates of intrinsic value and, therefore, we believe our portfolio is more attractively valued today than it was before the downturn. This has given us the opportunity to rebalance the portfolio toward companies with higher risk-adjusted returns, largely by trimming shares of our holdings that withstood the downturn relatively well. In one example of this