NFLX

The “Uninvestable” Twitter and Netflix Buoyed By Takeout Chatter

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By Kris Rosemann and Brian Nelson, CFA At Valuentum, we like slam-dunk, no-brainer investment opportunities–like Microsoft (MSFT) in the mid-$20s before it doubled, or Visa (V) prior to its strong equity price performance in recent years, or even cigarette-maker Altria (MO) in advance of its ongoing march higher since the dawn of the release of the inaugural Best Ideas Newsletter. Our members count on us to use our knowledge of valuation to sort out “investable” stocks from “uninvestable” ones; good stocks with fundamental promise from bad ones built on fantasy outcomes. Benjamin Graham calls what we do “investing,” while he may call readers that dabble in the two highlighted stocks in this piece “speculators.” There is a difference, and it’s … Read more

The Quiet Analyst Speaks

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Image Description and Source: Mailslot for Cantor Fitzgerald, on the top floors of the WTC. The mailslot was located in a post office near the WTC site. The mailslots are with the Smithsonian Institution. Travis Wise. It’s 9pm Sunday, September 11, 2016. The day is a somber one. The 15th year passing of the tragic events of 9/11 were on everyone’s minds, and I can’t help but think specifically of Cantor Fitzgerald. The financial services company’s headquarters were on the 101st-105th floors of One World Trade Center, just a few floors above the impact zone of one of the hijacked airplanes. The firm lost 658 employees, over two thirds of its workforce, more than “any of the other World Trade … Read more

Netflix: The Painful Slowdown Begins

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By Brian Nelson, CFA We’re not going to say much about Netflix’s (NFLX) quarterly “miss” other than adding 1.7 million members, as it did during its second quarter 2016, wasn’t horrible. The media outlets and sell-side analysts will tell you that this came in below Netflix’s 2.5 million net new member forecast and below the 3.3 million net-add mark in the prior-year. This is no surprise to the Valuentum readership. We had been expecting significant weakness at Netflix. The stock is ~15% lower in after-hours trading. What to do now? Well, the air is slowing coming out of the Netflix bubble. The market is slowly realizing that growth in the US is grinding to a halt. On a trailing 12-month … Read more

Apple’s iPhone Update Cycle and the Netflix Rumor

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By Brian Nelson, CFA Have we finally reached the limits when it comes to enhancing the functionality of the smartphone? Many are speculating this to be true, if Apple’s (AAPL) decision to now “take three years between full-model changes of its iPhone devices, a year longer than the current cycle,” is true, as reported by the Nikkei Asian Review May 31. The report comes a mere month after Apple’s first-quarter internal unit sales metrics left much to be desired, “Apple: Nowhere To Run, Nowhere To Hide (April 2016),” where unit sales of the iPhone dropped 16% and where iPad performance was even worse. A logical read-through from the news of a more prolonged update cycle may be that the iPhone … Read more

ETE Down 70%; IBM Poor Quality, Netflix Begins to Implode

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Shown above: Energy Transfer Equity’s recent share price performance. A lot of investors depend on us for our energy research. We’ve been busy publishing on the website, and we can’t possibly send out all of our research via email, so please come visit. Many are aware of our take in any case: the energy master limited partnership (AMLP, AMZ) isn’t going away tomorrow, but it may not last over the long haul. This is nothing new. We’ve been saying this since the peak in energy MLP share prices, which just so happened to coincide with Energy Transfer Equity’s (ETE) heights in the mid-$30s. Our readers understand that we’re taking the long view with MLPs when we talk about business models … Read more

Netflix’s “Moat” Eroding; Energy Transfer Equity’s Blunder Continues

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By Brian Nelson, CFA You won’t see us holding Netflix (NFLX) or Energy Transfer Equity (ETE) in the newsletter portfolios anytime soon, and recent news only supports that viewpoint. We talk about companies not included in the newsletter portfolios as part of their ongoing research and valuation coverage on our website. I must say that as a recent subscriber to Netflix, some of their movie suggestions sent via email haven’t been all that bad – their algorithm must have me figured out. As a logical thinker, and not one swayed by spontaneous gratification, it’s still hard to forget the shortcomings of their content library, in aggregate, however, “5 Reasons Why We Think Netflix’s Shares Will Collapse.” Even if we were to … Read more

Thinking About Increasing Equity Exposure Modestly in Best Ideas Newsletter Portfolio

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  Image Source: Berkshire Hathaway By Brian Nelson, CFA I’m putting together something for you… …an annotated commentary of Berkshire Hathaway’s (BRK.A, BRK.B) recently-released 2015 annual report, and specifically Warren Buffett’s letter to shareholders. Why does my opinion on this topic matter? Well, having trained hundreds of equity and credit analysts on the concept of “economic moats” (or competitive advantages) across continents for one of the largest independent investment research firms and its clients and beyond, I believe that my opinion is at least worth hearing on the topic, if only for thought-generation, conceptual understanding, and debate. Given some of the recent technical strength at Berkshire, we are also considering taking a bite out of shares should markets remain strong, … Read more

Saturday Morning Musings: Nelson’s Two Pet Peeves

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Brian Nelson, CFA First, my pet peeve #1. In the case of our call on Kinder Morgan (KMI) from last June, “5 Reasons Why We Think Kinder Morgan’s Shares Will Collapse, (which they did)” we believed market observers and analysts were exploiting investors’ lack of knowledge regarding the specificity of various measures of “cash flow.” To no surprise perhaps, they are still doing it! There are at least a half dozen measures of “cash flow,” three on the cash flow statement alone (CFO, CFI, CFF), one derived from the cash flow statement (CFO less all capex = FCF), and a handful associated with valuation (FCFF = EFCF, FCFE), and at least one associated with master limited partnerships, the most inappropriately-named … Read more

Netflix Shareholders Need to Get Real?

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By Brian Nelson, CFA “Netflix is valued as if it will have the economics of three US operations, without having to pay at all for the next two…” We have no problems with investors playing with “fire” if they know that they are and don’t mind losing their shirts, but we posit that, given the popularity of the acronym, FANG, which stands for Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google, now Alphabet (GOOG, GOOGL), many unsuspecting investors have been lured into Netflix believing these four companies share similar qualities. They absolutely 100% do not. On one hand, Facebook, Amazon, and Alphabet have incredibly strong balance sheets and generate copious amounts of free cash flow, as measured by cash flow … Read more

We Like the News! Buffett Scoops Up Kinder Morgan; FVE: $20

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It looks like crude oil (USO) overproduction will continue. Dashing hopes that any rational behavior would prevail in the energy resource markets, member nations of OPEC February 16 said not that they would cut output but that they would not increase crude-oil output any further, as if the current pace of production isn’t already drowning the world in the black liquid. It turns out the rumor from last week had some basis to it, “Your Hard-Earned Money,” but it didn’t have much substance, in our view, especially since the deal hinges on cooperation from Iran, which remains dedicated to increased production to reach pre-sanction levels. We’re not reading much into the news, as Saudi Arabia, while included in the parties … Read more