Thursday, July 26th, 2012 at 12:49 am
I am buying Netflix Stock at $60 a share, despite a rapid $20.11 a share drop in today’s trading session. The drop can attributed to a second quarter earnings report. Full disclosure, I actually bought a $70 call option expiring Jan 2014 for NFLX.
Why invest despite disappointing earnings?
- Netflix put up $.10 a share for it’s Q2 2012 earnings, which actually surpassed many analysts expectations.
- Total revenues increased 12.8% Year over Year to about $889 million. Growth in both domestic and international revenues
- Total subscribers increased by about 17% from the prior year
- Netflix could be on the verge of “taking over the world” when it comes to online television.
How can Netflix “take over the world.”
Netflix has a very unique opportunity, which is that the company has an early entry lead to the market. Most people realize that Netflix’s online service is a fraction of what it could be with more content. I currently am a Netflix subscriber, but I am finding it very hard to find quality content that interests me. I personally do not consider Netflix a good place to find good movies. Ultimately, the battle for content will decide the winner.
Netflix has the proven infrastructure, it just has to land the content to be king of it all. Could the content go somewhere else or at the very least be split amongst other providers? Of course, but if you were distributing a movie, Netflix is currently the best gig in town to make it happen.
The downsides to Netflix
The level of entry for competition isn’t as high as many make it out to be. Furthermore, Amazon and Apple already have loaded guns when it comes to distributed media.
I personally find the most un-easing thing about Netflix to be the management (CEO: Reed Hastings). When Netflix talked about splitting their online content from their dvd service into a new company called “Qwikster,” it scared me a lot. I understand that DVD delivery service isn’t the future, but it made me feel as if they have absolutely no idea what they have going for them right now. The name and early entry is one of their best assets. If they don’t see that, then something is terribly wrong.
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Sunday, July 22nd, 2012 at 9:43 pm
Six Flags Entertainment Corp (Symbol SIX), might be one of the best short positions available in today’s market. I’m sure these words would make Mr. Six sick to his stomach.
- Six Flags’ Chapter 11 bankruptcy in August of 2009
- Six Flags gave up 92% control to it’s lenders for canceling its debt to lenders
- Was only profitable 1 out of the 4 last years and that was to a negative balance in “unusual expenses” for the year.
- Overall Revenues have not shown many gains at all in the last 4 years.
- The stock has more than tripled since June 2010, with very little fundamentals to actually support it.
- The P/E is 855.18
The only real pro I can see in this stock is that with the forgiving of debt, the company has a very small amount of debt in comparison to assets. Because of this very little debt, the overall earnings per share for the last quarter on record looks fairly strong, but even if that pace keeps up for the entire year, we are still talking 80-90 P/E for this stock.
I have read analysts reports (link) that talk about all of the potential and positive trends, but honestly I just don’t see why I wouldn’t want to short this stock, other than the fact that option chains are not available for Jan 2014. If these options are released anytime short, you can be certain I will be considering throwing a small portion of my portfolio (I would guess 5%) into a leveraged short position on Symbol SIX.
Until they, let the hype continue and I pray the stock hits $60+ a share despite all logic, but who said the stock market was logical anyways?
Friday, July 13th, 2012 at 6:40 am
I am currently long on JP Morgan Chase & Co. ( Symbol JPM ). You might be taken back by that statement with all of the recent bad press related to large losses from bad investments, but does anyone even look at fundamentals anymore? JP Morgan is making hand over fist money and has a P/E of about 7.5!
Absolutely insane that this stock has performed so poorly, regardless of the bad media. In fact, despite the investment loss, JP Morgan is still expected to report a giant gain for the second quarter (most likely over $3 billion). Furthermore, the last 4 years of performance (before taxes): +$26.74B, +24.85B, +16.06B, +2.77B. That is $70 billion dollars (before tax) from 2008 until the end of 2011. Market Cap of JPM, only $129.58 billion.
Now of course you have to decide which factors and heavily you weight those factors when deciding on investment decisions (disclaimer: consult a professional), but how much sweeter does this stock get?
- P/E of 7.5
- Making money hand over fist, even AFTER massive mistakes
- Has a dividend
- Market Cap is drastically undervalued compared to 4 year performance (in my opinion)
- Heavily institutionally owned stock (74%).
- Has flirted with the $40+ range numerous times within the last 2.5 years. Note: $40 would be a +17.5% gain from today’s closing price.
If you are looking for a long-term stock, I think JP Morgan and Co. ( Symbol JPM ) should probably be in the running for a portion of your portfolio. Honestly I wouldn’t be surprised if this stock hit $45-50 by the end of 2012.
Tuesday, July 10th, 2012 at 6:39 pm
I am happy to announce to my readers, that my personal stock portfolio is currently over 10% return for the year. In fact it is up 11.8% as of July 10th close. Additionally, there is still 174 days left in this year. How have I been so successful?
- I straddled Best Buy (Symbol: BBY), sold on a bounce and then sold again on a free-fall.
- I was long on Sprint (Symbol: S) for a return of about 12% on my total portfolio.
- I shorted Monster (Symbol: MNST) for a very quick 11% gain, or about 1.5% return on total portfolio
- And a bunch of various smaller trades, including GE, MET, DOW, AAPL.
- I sold out of Amazon at a bad time to take a massive loss
- I bought into Netflix (Symbol: NFLX), thinking that it was ready to regain $100+ a share.
- I bought HP (Symbol: HPQ), and it was a dud.
- My conservative cover call positions, really didn’t pan out to be too successful. Most were gains, but fraction of percentage gains.
Why such a long delay on an update? Because I changed brokers. Because I deal with such small amounts of money, I decided to go to OptionsHouse from Etrade. They had a promotion that they would transfer it over without cost and I decided to jump. Do I like OptionHouse More? Yes and No. The fees are substantially cheaper, but the interface isn’t as good as some of the Etrade products. However, the fees are so much cheaper, that I will continue to stay with OptionHouse. Five bucks for a option trade of 5 contracts or less, hard to beat.
There was a little but of a hick-up though, one of my cost basis did not transfer over properly and they solved one problem, but made another. They added the cost basis (that I had to give them via email), but it immediately showed up as a gain.
Regardless, be prepared to have more stock portfolio updates and recommendations. At this current rate I could even hit a crazy 20% by the end of the year (or lose the 11% I have gained thus far).