Polen Capital, an investment management company, released its “Polen Focus Growth Strategy” third-quarter 2022 investor letter. A copy of the same can be downloaded here. The fund returned -5.47% net in the third quarter compared to -3.60% return for the Russell 1000 Growth Index and -4.88% return for the S&P 500 Index. Inflation and interest rate hikes caused a decline in the fund’s performance in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Polen Capital highlighted stocks like Netflix, Inc. (NASDAQ:NFLX) in its Q3 2022 investor letter. Headquartered in Los Gatos, California, Netflix, Inc. (NASDAQ:NFLX) is an entertainment services company. On October 20, 2022, Netflix, Inc. (NASDAQ:NFLX) stock closed at $268.16 per share. One-month return of Netflix, Inc. (NASDAQ:NFLX) was 18.44% and its shares lost 58.94% of their value over the last 52 weeks. Netflix, Inc. (NASDAQ:NFLX) has a market capitalization of $119.252 billion.
Polen Capital made the following comment about Netflix, Inc. (NASDAQ:NFLX) in its Q3 2022 investor letter:
“We have spent months analyzing Netflix, Inc. (NASDAQ:NFLX)’s ability to monetize shared passwords, as there are over 100 million households that use, but do not pay for, Netflix. We believe Netflix has outlined reasonable plans for cracking down on password sharing and now expect the company to be able to monetize roughly 30% of that user base in the short term, which has the potential to add billions of dollars to annual free cash flow. In addition, we have analyzed the opportunity for an advertising-supported subscription model, and Netflix has also made meaningful progress in this area by partnering with Microsoft and attracting new digital advertising talent.
Ad inventory inside, we believe Netflix content will be highly valued by advertisers and could add quite substantially to the company’s revenue and free cash flow growth. Netflix will likely generate roughly $1 billion in free cash flow this year. With password sharing monetization, free cash flow should exceed $3 billion-$4 billion in 2023. In our opinion, the ad-supported model plus new non-ad subscriptions should lead to annualized free cash flow growth at least in the mid-teens from there over the next five years.
While Netflix faces formidable competition, we believe its ability to consistently deliver compelling original programming across geographies, categories, and cultures is unmatched. This is supported in our view by Netflix’s share of time spent within the important original programming category in the U.S., its most competitive market, which remains multiples higher than its next closest competitor.”
Netflix, Inc. (NASDAQ:NFLX) is in 19th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 95 hedge fund portfolios held Netflix, Inc. (NASDAQ:NFLX) at the end of the second quarter, which was 109 in the previous quarter.
We discussed Netflix, Inc. (NASDAQ:NFLX) in another article and shared Ensemble Capital’s views on the company. In addition, please check out our hedge fund investor letters Q3 2022 page for more investor letters from hedge funds and other leading investors.
Disclosure: None. This article is originally published at Insider Monkey.