Netflix Inc. (NFLX)

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.

Has had a phenomenal move over the last little while and hit an important reversal today. From a technical standpoint, it is clearly in an upward trend, well above its 20 day moving average and is outperforming the US market. Strategy is to wait until you have a little bit of weakness.

Chart shows a big drop in 2011 but it is now starting to make a base. 200 day moving average is now very much catching up to the current price. A very strong possibility of a breakout.

Recently a number of US brokers have indicated that this has gone down too far and have started to add some value to it. Chart indicates early signs of bottoming but he would like to see a lot more. Hasn’t been around long enough for a seasonal study. If market conditions are weak between now and October, you may be able to Buy at lower than current prices. He prefers stocks that have well-defined values.

The numbers don’t make sense. $16.24 model price. They just aren’t making any money at $8 a month.