Investment Review day 44 of 50: Netflix $NFLX (sold)
Netflix pioneered subscription-based streaming, changing the way we consume media. Its innovative approach to content production and distribution, including significant investments in producing original shows, revolutionised the traditional TV and movie industry.
I have a super complex history with this one. It was the primary driver of my portfolio returns between 2007 and 2015, and I learned much about my own investing philosophy and risk tolerance as a result of being a shareholder!
Netflix originally announced its pivot from mail-based rentals to streaming in 2007. As a streaming early adopter (er, BitTorrent! 🫢) I was deeply struck by the sense that this was the future of entertainment and allocated 12% of my portfolio to $NFLX in 2007. If you’re building a highly concentrated high-conviction portfolio, the best time to do that is early in your investing career – you have plenty of time to learn lessons and recover from missteps.
The position grew rapidly over the following years, and by 2010 it made up 25% of my portfolio. After much soul-searching, I concluded that this was just too much exposure to a single company, so in 2010 I sold two-thirds of my position.
I hadn’t planned to add to the stock again, but the company’s missteps with Qwikster hurt the valuation, and I found myself with the opportunity to add once again in 2012 at around half the price I’d sold two years prior.
The stock then began a dizzying multi-year ascent, and I found myself with the good problem of having to trim back my exposure on four occasions between 2013 and 2015, always trying to keep this to a sub-20% allocation within the overall portfolio.
Although I retained a substantial allocation to the stock, the launch of Disney+ in 2019 perhaps heralded the commoditisation of streaming, and it seemed to me that the network effects inherent in $DIS’s business model might prove to be an impassable hurdle for Netflix. I finally sold my entire Netflix position in two tranches in 2020 and 2021, timing the final sell pretty accurately, given the end-of-pandemic impact to the share price. The stock has been volatile over the last three years, but it’s finally back to my 2021 sell price, however, to my mind those headwinds still exist, so this is no longer a company on my radar.
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I’m putting my holdings under the microscope. Over the next 50 days I’ll break down my whole investment portfolio. Wins, losses, and the ‘why’ behind it all. And on day 50 I’m going to share my full portfolio so you can see how my strategies played out in the real world over the last twenty years and what we can all learn together. Follow along for the journey! #StockAnalysis #50daychallenge
