Netflix Inc. (NFLX)

(Market Call Minute.) Lots of competition out there and lots of competition coming, especially from Amazon (AMZN-Q). Lofty valuations.

(A Top Pick Feb 19/16. Up 13.76%.) It looks good, and it is getting more and more popular. It is much better quality than it was. $120 would concern him, and wouldn’t want to see it break down through $90.

This was one of the driving forces behind the upgrade in content on TV and they did really well. From his perspective, it looks good. Trading strongly and has come off the bottom. Because the stock had such a huge run last year, it probably needs some time to work that off, and might become investable again. If you are nervous, this is the kind of name that you could trim back for now, and then on a break out go back in.

Trades at an amazingly large valuation. It went to crazy astronomical valuations based on growth. They pursued international expansion and have grown subscribers that way as well. To remain competitive, they’ve had to invest in content, which is exceptionally difficult, so it becomes no different than a movie company, a risky proposition. They say they are making money, but what they don’t tell you is that they invest a huge amount of money, capitalize a bunch of expenses, and slowly write off those costs against some accountant’s view of how long they are going to be able to earn a revenue stream off that.

Loves the product, but not the stock. Have a great subscriber based business model, and always have the potential for price increases, but there is a lot of competition, particularly for content. Trading at 90 to 100 times earnings, and it takes a lot of earnings growth to keep the stock at this multiple, which is just not going to happen.

A very high growth momentum stock. This is down because they just reported and their international subscriber growth was below expectations. There is not a lot of fundamental core earnings valuation support. She is more of a value investor, so not the kind of stock she would buy. These types of names tend to be driven by technicals. If it reaches its 50 day moving average, maybe you step in there and then buy some more.

He likes the story. There is significant support in the low $80s that it bounced off of recently. This is a positive thing. There is a mini-uptrend and that is positive. It could get into a different resistance zone. It looks good so far. He would stay with it if he held it.

Not a fixer-upper, but one that sold off a little. He would have no problem buying this at the current price. It tested at around $80 in the last selloff. It had such a nice run from 2012 to late 2015, and then had a selloff. A very volatile stock, but below $100 he really, really likes it. Thinks it certainly gets above $100.

More of a growth company, so he doesn’t own it. They are doing quite well and are conquering the world with their subscriber growth, as well as making traction in new countries. They want to be more like an HBO where they are creating content. As they get people roped on the $7.99 initial subscription, they have the ability to raise that. Over time you are going to see more cable operators include them in their offerings. Likes the company, but doesn’t like the valuation.

(Market Call Minute.) A disruptive company, and one that he would like to own again. They are hitting the leading stocks right now in the market. Thinks this is going to do very well over time. Look for any strength in the market to buy this.

Bull Put Spread. Sell a Put where the stock is now, which obligates you to buy it, and Buy a Put at a lower strike price just to hedge your position. He thinks this stock will be higher next year, because the momentum stocks on the tech side and/or the banks are going to be the real leaders next year. Those are 2 places to be. On this you should be able to retain about $4 in premium.

These types of companies are all at his EVB10. Even in the tech bubble back in 2000, there were only 1 or 2 companies that were EVB10. This is expensive. Expect volatility. This next quarter, if they have good earnings, it will maintain its EVB10, but you are playing with fire with quite a few of these companies. They cannot sustain their valuations at these high levels.

Trading at about 500X earnings. It has great content. Have put up some really impressive numbers on new subscribers. She is willing to pay up for growth, but this one is a bit much. The problem is that so much of the value you are paying today for the stock doesn’t happen until much further into the future, so you are putting all those growth expectations that you are paying for today, and if it doesn’t happen that is where you are losing a lot of money.

This is really attractive and he regrets not being in it. This is moving into 150 countries with their streaming. He continues to see this as being a great investment for a very long time.

It is not in his universe because the PE is stratospheric. Everything good that could ever happen is already priced into the stock. Tremendously speculative and risky.