NFLX Notice
Not a victory lap yet but others are seeing it.
I put out a missive on Netflix NFLX 0.00%↑ a few days ago, and I’ve noticed a few glimmers of positive research and confidence in the stock here. Plus, there are multiple ways to play it depending on your investment style that is worth exploring.
First of all, the folks over at Coutue are out trying to raise another $2B fund, and they put together a deck on the “carnage” in growth stocks. I’ve no deep knowledge of Coutue, but they have a valid research process. They have a lot of fundamental research power but don’t know much about macroeconomics. Neither does Cathie Wood. They might argue that it’s outside their scope, but clients may disagree.
I think Coutue is smart to shift its approach to concentrating on companies that make money, have deep franchises, and will ultimately grow and provide strong returns if you can look past 2022. They note Netflix as one of these, and it amplifies our points from last week.
Selling Volatility
I’m happy the stock is up from $170 when we posted to $190, but this was not about a trade. We are likely in a bear market rally, so this could go back down to any level. But there is value here.
When value is combined with volatility, it creates an opportunity for tax-free accounts. Covered calls can be a good way to generate income, and because Netflix is volatile, there is quite a bit of “premium” there.
Options prices are sloppy, but the August 19 190 strike trades around $19, with the stock at $190. That’s a 10% return in one month. If you can do that monthly, you’d make over 100% a year in premium!
Before you get too excited, understand that the stock could go down and/or premiums could dry up.
What’s dawning on more people is that:
Netflix makes good money and has a strong position.
Consumers like the brand (more so than other streaming providers.)
There may be more upside in an advertising model than people thought.
So I am long in taxable accounts and have employed some of the “sell volatility” methods in other non-taxable accounts.
As I always say, this is not financial advice. Nothing is real, nobody knows anything. Don’t try this at home. Go to the pool and float with a drink in your hand - it’s more fun than investing in stocks.
Nobody loves Netflix or the pool more than our dog Cody!