Rule #1 Real World: Investing In Netflix | Summary and Q&A

TL;DR

By following a simple investment rule, an investor took advantage of negative news surrounding Netflix's perceived slowdown and profitably invested in the company.

Key Insights

• ⌛ Investing in beloved brands during times of negative news can yield significant returns.
• 🉐 Assessing a company's competitive advantage, management, and value is crucial in determining investment opportunities.
• 🔬 Stock prices can experience drastic declines, creating opportunities to invest at attractive valuations.
• 🥺 Patience and strategic investment decisions can lead to substantial long-term gains.
• 📰 Paying attention to market news can provide unique investment opportunities.
• ❓ The CEO's ownership of stock can provide insight into their commitment and decision-making.
• 📏 Investment rules and processes can help investors make informed decisions during market fluctuations.

Transcript

at rule one we put our money where our mouth is and I'm going to walk you through a real world example that we had a lot of success on over the past year Netflix was Front Page News talking about how there was a perceived subscriber slowdown now I've been a Netflix subscriber and customer for over a decade since since they were shipping DVDs by mai... Read More

Questions & Answers

Q: How did the negative news about Netflix's perceived subscriber slowdown impact its stock price?

The negative news caused Netflix's stock price to decline by 50%, from $700 to around $350 in the beginning of 2022.

Q: What factors did the investor analyze to determine if Netflix was worth investing in?

The investor assessed if Netflix had a moat (competitive advantage), strong management with CEO Reed Hastings holding a significant amount of stock, and if the company's value was attractive.

Q: How did Netflix's stock price further decrease after the investor's analysis?

After Netflix's Q2 earnings call, the stock price dropped from $350 to $220 overnight.

Q: When should an investor have ideally invested in Netflix according to the example?

The investor suggests that investing in Netflix when the price was under $200 last year would have resulted in over 100% returns this year.

Summary & Key Takeaways

• Despite Netflix facing negative news of a slowdown, an investor saw an opportunity to invest in a beloved brand.

• Following a simple investment formula, the investor assessed the company's moat, management, and value.

• The investor's analysis suggested that Netflix's stock was undervalued, leading to a profitable investment opportunity.