Most of my stocks are Saul-type stocks with reasonable 1YPEGs, but I have a few holdovers from my less-informed old days like Netflix. I’ve been slowly selling Netflix, it was a 4% position, and I sold in April (after earnings), May and June down to 2% now.
People are really excited about the sub growth, though revenue growth is only 25%, earnings growth is mildly negative (TTM 3.04 vs. 3.32 based on pre-split values). The PE is 267. Wow I just noticed institutional ownership is only 13%, I’m surprised by that.
I’m sure many NFLX investors have a world domination scenario in their head, where 5 years from now they are in 150 countries and have incredible economies of scale and profit, and no need to spend on expansion. But OTOH they could end up another Amazon doing big volume with meager profit.
Anyway I’m sure I could get plenty of rah-rah on the NFLX board, but anyone here have strong thoughts on ownership at this point? It’s not an obvious call to me. Thanks.
But OTOH they could end up another Amazon doing big volume with meager profit.
Amazon is doing quite alright, don’t ya think
In terms of companies like Netflix/Amazon (world domination now, massive profits after dominance complete) I’ve sold out on recently as I thought there would be easier targets. I think Netflix will have problems once they stop growing and the economies of scale don’t really pan out. Apple and Disney could cause a lot of problems for Netflix down the road.
As for Amazon I don’t like either of the businesses they are in, e-commence or web hosting. In the long run shipping costs and competition will hurt their retail biz. On the AWS side, competition will commoditize the offerings.
Both companies have been awesome investments and will probably continue to do so given their moats (yes Netflix has a huge moat), but given with their respective valuations and potential headwinds forthcoming I thought it be more prudent to allocate the capital elsewhere.
I am in the same boat but letting my expensive stocks run. I am down from 65 stocks to 36. I still have NFLX, AMZN, SBUX, MIDD, TSLA, DIS and some other expensive stocks but they have been doing really well this year. I was going to sell GOOG if earnings were not good and it surprised today. I am on the fence about PCLN and PRLB. Slowly working my stock list down to around 25, I hope. It is getting hard for me to sell now. Other cheaper stocks are doing well too ie SKX, AMBA, BOFI, CRTO, SWKS. Only ones not doing well are some recent additions like INFN, PAYC, SEDG, INBK but I am in a wait and see mode for them. Great time to be on this board and continuing to learn.
Tom Engle has admitted that trying to figure out the valuation of NFLX is really really tough to do. On the one hand, the P/E is crazy high and earnings have been drifting lower for the past 4 quarters. However, in just this past quarter the number of subscribers in the US alone has unexpectedly skyrocketed up 50% from 600,000 to 900,000!!! This was the primary reason for the 18% jump in stock price today.
Internationally the number of subscribers up ticked an unexpected 25%. Amazing growth anyway you look at it. And the stock had already risen 100% just this year.
NFLX has grown to 10% of my portfolio with a 350% gain over the past several years.
The smart reasonable Saul part of my investment education says to sell. But the fantastic growth gives me pause.
No, I don’t have any strong thoughts on NFLX ownership, but the ride has been wonderful. Is it time to sell or at least lighten ownership? Perhaps. The CEO states the goal is to get earnings growing in 2017 after the heavy infrastructure investment world wide slows.
Just some food for thought on a very unique company.
I find it galling to watch the stunning rise of NFLX (and AMZN). I understand the premise: the value of the opportunity of high future earnings vastly exceeds the value that would be presented by demonstrating what would undoubtedly be high earnings now. (AMZN took time out to show that.)
Yet I am completely unable to extrapolate to the eventual global margin which lies in the future. That means I cannot value the company now. The figures I like to see for an investment in any company are absent. A rule therefore says I may not invest.
It is not altogether a bad rule because other companies trying this trick have been shot down in flames. You see a few climbers (add TSLA if you will) making their triumphal way to the summit; you do not see all the decades of dead climbers below. The glorious few are admirable beyond belief but it is beyond my courage to emulate them.
So I grit my teeth, raise my hat to their noble success but choose to be the cobbler who sticks to his last. No point in jealousy. Cobblers do not make a bad living after all: it’s a solid enough business.
I still have NFLX, AMZN, SBUX, MIDD, TSLA, DIS and some other expensive stocks but they have been doing really well this year.
I don’t know that I would put DIS and SBUX under the same label of expensive as NFLX and AMZN… I own the former and they are not cheap, but they are also not crazy pricey.
I find it galling to watch the stunning rise of NFLX (and AMZN) …
I’m also a sideliner on NFLX, but I can’t be galled at it. As a long-time customer of NFLX (since maybe month number 2 or 3 !!), I wholeheartedly believe in the business, the value, and the potential. As an investor, though, I don’t own any except indirectly through whatever mutual funds might be in my 401k.
NFLX makes amazing swings to the upside, and equally-as-gut-wrenching to the downside. Probably – as someone above pointed out – because the majority of the ownership appears to not be with institutional investors but with individuals…Individuals who may make quick decisions about the short-term rather than the long-term.
Ignoring the inability to evaluate on standard metrics like P/E which fail for NFLX… for me, the risk of yet another 25-75% overnight drop is too high to offset the potential gains, so I stay on the sidelines as an investor. I really want to own NFLX, but the market conditions make it too risky for my taste, and I consider myself very risk-tolerant.
I am re-balancing my portfolio as well. My Netflix position grew to 13% of my portfolio and I just sold half of it last week to bring the ratio down. I am keeping the remaining 6% because I have a strong conviction with the success of the company. I also have a hard time parting with a long term winner that I use on a daily basis.
I think it’s hard to value companies like Netflix because they are rare fundamental disruptors of industries. They have a certain je ne sais quoi that really mess with traditional evaluations. The founder has a rare talent for successful innovation and running a company successfully.
Congratulations on your NFLX holdings. I’ve been a subscriber and investor in Netflix since shortly after the IPO (not continuously - I’ve taken profits along the way and bought back in.)
As of today NFLX is 30% of my taxable account and 10.6% of my SEP/IRA. I have three quarters of my taxable position covered by calls (those dreaded options again), so likely by the end of the year it will fall to about 7.5%.
