We recently compiled a list of the 14 Best 52-Week High Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Netflix Inc. (NASDAQ:NFLX) stands against the other 52-week high stocks.
The U.S. stock market has been on a roll, with major indices clocking double-digit gains even with the U.S. economy showing signs of weakness. The gains have come from investors shrugging off the uncertainty around the U.S. presidential election and monetary policy to continue betting on various counters.
Consequently, the S&P 500 is already up more than 17% for the year, driven by gains in the communication services and financial services sectors. Likewise, technology stocks have also contributed to driving the overall market high as investors continue paying close attention to some of the big plays around artificial intelligence.
READ ALSO: 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers and Top 10 ADR Stocks To Buy According to Hedge Funds.
The tech-heavy NASDAQ index, which gained 18% for the year, comes on growing expectations that the U.S. Federal Reserve has hit the peak of its monetary policy tightening spree. With expectations that the central bank will start cutting interest rates by as much as 50 basis points, according to CNBC, investors’ sentiments around tech stocks have improved significantly for September.
Investors remain optimistic about the stock market outlook heading into year end because of the positive impact of low interest rates. The Fed’s cutting interest rates will result in a significant drop in borrowing costs, which bodes well for capital-intensive businesses looking to access cheap capital.
The central bank aims to achieve a soft landing for the economy. In this situation, inflation must return to the 2% goal without the U.S. economy sliding into a downturn. If the central bank reduces interest rates prematurely, it faces the danger of a severe surge in inflation. Conversely, if it reduces rates too late, it might cause a severe recession.
While interest rate cuts are expected to offer a much-needed boost, disappointing earnings, and lackluster guidance could curtail market gains, especially for the best 52-week high stocks to buy, according to short sellers.
Several companies are under immense pressure after their valuation skyrocketed amid the artificial intelligence frenzy. Consequently, any concerns about slow earnings and revenue growth should send jitters, triggering significant pullbacks.
Adam Turnquist, the head of technical strategy at LPL Financial, mentioned that the S&P 500 typically experiences about three annual declines of at least 5%. On average, it has seen around one 10% decline each year.
“Expressing this data another way, 94% of years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction,” Turnquist said, according to USA Today. “We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient.”
Looking forward to the rest of the year, experts predict that the best 52-week high stocks to buy, according to short sellers, could keep rising, but they caution about the dangers of premium valuations.
At the same time, financial experts believe that although economic expansion will slow down in the next few months, they don’t see a situation that could cause a recession.
Our Methodology
To compile the list of the best 52-week high stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week highs (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order based on their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A home theater with family members enjoying streaming content together.
Netflix Inc. (NASDAQ:NFLX)
52 Week Range: $344.73 – $711.33
Current Share Price: $692.42
Short interest rate: 1.72%
Number of Hedge Fund Holders: 103
Netflix Inc (NASDAQ:NFLX) is an entertainment giant that offers streaming services for T.V. series, documentaries, feature films, and games across various genres and languages. The streaming giant has risen to three-year highs due to an aggressive password crackdown and the marketing of an ad-supported subscription plan.
While the company generates a significant chunk of its revenues from subscription plans, its push into the advertising scene has cemented its position as one of the best 52-week high stocks to buy, according to short sellers. Revenues in the second quarter were up 17% to $9.56 billion, as net income increased to $2.1 billion from $1.4 billion a year ago.
A confirmation that the company has secured a 150% year-over-year increase in upfront advertising commitment is one factor poised to diversify Netflix Inc (NASDAQ:NFLX)’s revenue streams. Netflix, which has recently stopped offering its most affordable ad-free plan to encourage more people to watch its ads, has traditionally approached advertising cautiously.
So far, the platform has kept its ad prices high, at $65 per thousand views (CPM) compared to Disney Plus’ $45.11 CPM. Additionally, unlike other services, Netflix Inc (NASDAQ:NFLX) has restricted the number of ads shown on its platform and requires viewers to choose to see them.
To enhance its advertising revenue, Netflix announced it intends to start winding down its ad-free basic plan in the U.S. and France. The streaming company further mentioned that incorporating ads into its services enables it to provide more affordable options for its customers and generates extra income for the business.
Given Netflix Inc (NASDAQ:NFLX)’s massive customer base, advertising is poised to be a key driver of value. The company added 8 million new paying subscribers in the second quarter, taking its global streaming paid memberships to 277.65 million.
As of the end of the second quarter of 2024, 103 hedge funds out of the 912 funds tracked by Insider Monkey had stakes in Netflix Inc (NASDAQ:NFLX). The most notable stake in Netflix Inc (NASDAQ:NFLX) is owned by Ken Fisher’s Fisher Asset Management which owns a $2.94 billion stake in Netflix Inc (NASDAQ:NFLX).
Here is what Polen Focus Growth Strategy said about Netflix, Inc. (NASDAQ:NFLX) in its Q2 2024 investor letter:
“Finally, we trimmed Netflix, Inc. (NASDAQ:NFLX) mostly due to valuation but also as a source of funds to add to the new position in Shopify. As a reminder, we added to our position in August 2022 amid broad concerns about the company’s ability to grow and monetize shared passwords. We expected Netflix to show progress in monetizing shared passwords, leading to robust free cash flow generation. This is now playing out and is appreciated by the market. Hence, given the balance of growth and valuation, we felt it was appropriate to reduce our exposure to a more normal weight.”
Overall NFLX ranks 13th on our list of the best 52-week high stocks to buy according to short sellers. While we acknowledge the potential of NFLX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
Add Comment