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I also want to ask you, Bill, while we have this opportunity, of course, about your portfolio. Um, the fund is in the red this year, even though the market is growing. So what do you tell shareholders about the reasons for this, what do you think about the valuation and why they should stay with you?
Yes. So, you know, our goal is not to find stocks that will go up in the next 90 days. You know, the market is increasingly moving towards very short-term dynamics. Yes, you know, index funds are “eternal” holders that actually remove shares from free circulation. And then, you know, very short-term investors try to guess whether the company will beat earnings expectations or forecasts or not .
And this led to massive market volatility. And, you know, the focus this year was on areas related to AI: hardware , energy, a very narrow market. And that really created, in our view, a great opportunity for us to buy, over a multi-year period, some of the great, sustainable growth franchises that we love and have always wanted to own, but whose profitability metrics or P/E ratios made the future returns less attractive to us.
And we were able to acquire businesses like Visa, MasterCard, Netflix, and others at prices that we calculated would yield over 20% internal rate of return over a three, four, or five year holding period. So these are excellent conditions for us . Um, you know, of course, we would like to end the year confidently.
Every investment manager wants to have a positive year. We have certain...you know, if we could withdraw our funds daily, monthly, or at the end of the year, we would probably try to position the portfolio differently, but I think that would lead to worse long-term results. So we feel like we have a small downside, just a single-digit percentage for our largest fund.
And with our new tool, actually, well, even before I got to Israel, we had grown a little bit since launch in a short period of time, but most importantly, we have directed $5 billion of Pershing Square USA capital into high-quality long-term assets , which may be less attractive to those who want to make money next month, but I believe they will continue to grow profits and grow at a high rate over time.
Well, since you mentioned Netflix, that's exactly what I wanted to ask about, because the company reported yesterday and the results were quite disappointing. This capped a rather unfortunate period for Netflix, raising serious questions about how long it would take to restore content , as well as competition and user engagement.
Why? It looks like you added it back, judging by the August report. What's yours, what's yours... Yes, actually. So, I was on the plane when the financial results came out . Had a brief opportunity to get an update from the team. We actually evaluate this quarter very positively. We thought the results were well above expectations, although I understand the advertising did n't quite work as management had hoped , but I think they gave a good explanation.
I would say that Netflix is a high-yield utility asset. And if you're concerned that the choice of content that people watch has changed compared to last year or five years ago, it's led to... calculated timing, engagement, if you will. But for Netflix, the main thing is the growth rate of subscribers, stability, and the ability to set a price that corresponds to the enormous value for the consumer.
We believe all of these indicators are extremely strong. Today, the stock can be bought at one of the lowest valuations in history, and importantly, the P/E ratio is around 18. We expect earnings growth to be in the 20% range, or mid-to- high range for the foreseeable future, because it's like a utility—it's very hard to get someone to cancel their Netflix subscription .
They won the " streaming war." I do n't know who can replace Netflix. And so, I think they would like to have some, you know, big hits like "The Squid Game" or something, and they're making changes to the team to ensure that. But this is a great management team , and I'll note that 18x earnings today is a similar figure to cash flow.
Whereas four years ago there was a large gap between the business's profit and cash flow . So, as the business matured, it became extremely profitable in terms of cash flow. I think they bought back about 3% of the outstanding shares , if I'm not mistaken. In the most recent quarter, you know, this is another example of a stock that we're going to make more money on over time if the price is lower in the short to medium term because they're canceling out a lot more shares as a result.
So I think this is another good example of an extremely high-quality business where a short-term investor is looking for something to be disappointed about in quarterly results. But we expect our future internal rate of return ( IRR) to be significantly higher, certainly over 20%.
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