Netflix Inc. (NFLX)

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.

This is a great service and the stock has done very well, but at the end of the day you are looking at a stock that is trading at a 200 blended 12 month forward PE, which is quite high. There is a lot of cost in what they are doing in coming out with original content. Expanding internationally which is very, very good.

Just reported greater earnings. This is a GARP stock, “Growth at a Ridiculous Price”. Great business model because you get recurring revenue. At 300 times this year’s earnings and 150 times next year’s, he just can’t be there.

A great service and a great company, but a lot of times you have to separate the stock from the company and the business itself. There are a lot of exciting things happening with this. Global expansion where they could possibly reach 200 countries by next year. But looking at some of the negatives, there is lots of competition coming on board. This is trading at 100X trailing PE, 84X forward PE over the next 12 months. Growth rate is still pretty attractive at 35%, but you are paying quite a bit for that.

He has Shorted this one from time to time. Fundamentally it is a valuation question in terms of subscriber growth. There is no question they are offering good content which is disrupting the traditional cable cords. It is a question of whether they can keep that subscriber growth going. In his opinion, it is going to be very difficult to do. A volatile stock and not for the faint of heart.

We all love the service. You have to separate the service from the stock. It is expensive and they will have to continue to spend for the content they create. It is a model that others in the industry can emulate.

Sort of like Twitter (TWTR-N), but a little bit closer to having a place in his portfolio, but the multiple is a little too high for his liking. Trading at 104X forward earnings. PE to Growth ratio is 3.8%. He has to have a maximum of 2%, but ideally he likes to look at something between 1% and 1.5%.

Stock is lower, and he thinks it was the concern over future spending to grow internationally. Over 50 million users, which is incredible, so the concept is definitely taking off. Probably under some margin pressure. The guidance on future earnings was a bit disappointing. Such high expectations are built into a share price like this that has gone up so much that it trades at a very high valuation. He would just avoid stocks like this altogether.

Trading at 186X earnings. He always tries to keep in mind the difference between a great company and a great stock. This is undoubtedly a great company. They have transitioned from mailing DVDs to Internet services. Have original creative content of their own, as well as others, and are giving the cable companies a run for their money. Fabulous company but ridiculously priced stock.

Set all time high, going 10% up after the close today. He tends to be a seller to a momentum investor. He concentrates on the company. Price does not reflect value in the company. For a long time it has been a momentum play. 31 million subscribers.

Done well in the last year but over 3 years not so well. Long term growth could be great, but what if it doesn’t happen, it has a long way to come down. Not something he would get into.

(Top Pick Aug 10/12, Down 395.16%) He covered quickly and lost 20% himself. He used a stop loss. Company is more successful and growing users more than they thought. He re-evaluates at a 15% loss.

SHORT. (Top Pick Aug 10/12, Down 282.70%) He lost a bit of money when he got out last October. He has stop losses in place. He had concerns about competition and their subscriber base was not growing as quickly as people thought.