Second Shared Trade


I am lying on a nice sunny Mallorca beach as I type. So I decided to publish my potential second shared trade to spread the warmth. 

(Nah, I wrote this while I was waiting for my Train to Cardiff last week.)

The market was getting volatile while I was writing this, and I have placed a limit order on this well-known company, so if it does reach my price point, it would be executed while I am on my holiday.

I wrote about how I regularly invest in great companies. If the market is nice enough to work together with me, I might be able to add to my existing position at an entry price that I deemed acceptable.

My Second Shared Trade

Here you will find why I am buying, the risk and when I would consider selling.

[sociallocker id=”414″] Netflix (NFLX: NSQ) 11 September 2015

I am sure you know what is Netflix. I wrote about Netflix in my post about regularly investing in great companies where the share price dropped from $40 to $10 (post share split) in 2011, and it has reached a high of approx $130 in August 2015. That’s a 13 bagger in 4 years. That’s almost like a 90% increase per year.

Since then due to various concern about another strategy change and increased competition from other providers like Amazon, Apple etc, the share price is in the $95-$105 recently. So it is not without risk.

I am buying at below $90. (Trading at $98 as I wrote this post on 11 Sept)

Why am I buying:

Although with the recent strategy change which I would highlight in the risk section, I still think Netflix is a great company. It proves that it is willing to change its strategy (whether it is for better or worse, it is too early to tell), and that is really important in this information age. If you are slow in innovating, you would be disrupted by your competitors.

With increasing amount of people choose to save cost on Cable or Satelite TV, shifting to online streaming, the big pie of people who uses online streaming (whether it is Netflix, Amazon Prime, Youtube etc) is growing. Therefore the competition in this sector is getting fierce.

It is also rapidly expanding in other international countries. Once the international subscriber revenues start gushing in, there could be a nice pop to the share price if the growth continues.

I think we would still be watching online content in the next 5 to 10 years. Unless one day, a different sort of entertainment could keep us occupied. Virtual Reality (VR) Gaming perhaps??

Therefore I think Netflix would still be a good company as long as there is enough margin of safety.

Risk and when I might sell:

Netflix US announced it would drop the rights to EPIX, which means some popular films would be taken off Netflix over time, such as Hunger Games, Transformer etc.

Personally I subscribed to Netflix because I like it to be a one-stop shop for movies and TV series. Although I agree that those popular movies could be watched elsewhere.

Because of this change, I would personally discount Netflix premium, as this change would shift Netflix from being a one-stop shop to just another premium channel like HBO.

If Netflix subscribers start to slow down or worse, leave, I would be concerned about the high price premium that is built in Netflix due to the massive success in the past. So do not over-allocate, as this is a high risk, high return investment. [/sociallocker]

5 thoughts on “Second Shared Trade”

  1. I had a different opinions previously when i read the blog 2-3 months ago. Since then i decide to sign up to see what the fuss is about and then i realised this Netflix was the next big thing. Like FB when it was first released. Now a hosehold name among the younger genrations ‘ Netflix and Chill’. Did buy some netflix shares and now they are up by 23% as i write. Well written Dan!

    1. I think it depends on the tracker funds you are referring to.

      If they are index tracker funds, then I would recommend that. (Assuming that their annual charge is low, there are plenty of index tracker funds provider out there. They are between 0.1~0.5%. If they charge more, I would question why are they so high, but it should be pretty much the same with some tracking error so I don’t see much value paying premium for it)

      For other tracker funds, depending on the things they track, but in general, I don’t recommend high cost funds.
      It is generally better to do it yourself unless you don’t have the time.
      If so Index tracker funds are good enough, or just buy the top dog of the segment you want to track.

      Bonds, I do not recommend them, unless you are retired and require stable income. I see it as a sure way to lose money slowly, especially so in current economic climate where the interest rate only has one way to go up, unless it goes negative.

  2. Ye definitely. It’s interesting to see how this company changes over the years. The past strategy change has made it who it is now. I see this as a long term high risk, high return company. If you don’t have a position, it might be worthwhile to get in even at current price, but just watch your allocation as it’s High Risk. I already have exposure in them, so I opted for a price which has more margin of safety.

  3. Finally u putting proper meat to the blog! Love it. Well where is XXX going to go from here? It’s like Spotify against the world. And now competition everywhere. Will they rise like Facebook or fall like napster. Only time will tell. If XXX don’t start taking out their competitors amazon prime will haunt them. Also their competition with piracy.

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