The Next Netflix Stock

Any investor will tell you that picking a winning stock is hard.

In many instances, investing in the stock market can seem like gambling.

Why is that?

Often times, it is because newer investors do not take the time to do their own research.

Regardless, researching companies also isn’t a guaranteed way to make money on every stock.

So, how do you pick a winning stock or company?

Let’s face it, stocks rise fast.

Many of us see a company in the news after it’s share price seemingly exploded through the ceiling overnight.

So many investors look at these stocks and think back wondering why they didn’t think to invest in that stock.

One such example where this situation has taken place is with our dear friend, Netflix.

Netflix rose very quickly, and many of us were left completely in the dust.

However, we know that a select group of people were able to ride the Netflix bandwagon to what it is today.

So, who are those lucky people?

Those people are followers of the Motley Fool.

Did you know…

…the Motley Fool recommended Netflix to its subscribers in June 2007?

This success begs the question: How did the Motley Fool chose this company?

Stay tuned because you are about to find out!

The story of Netflix

You may be wondering…

…what did the Motley Fool see in Netflix?

Let’s first look at the market Netflix was in back in 2007.

Netflix started as an affordable mail content service.

Subscribers paid a flat rate of 9.99 or 17.99 to receive movies through the mail.

The price also included streaming of ten hours of free programming.

Back then, streaming was consumed in much lower hourly values.

Clearly, consumers were not spending as much time streaming.

Nowadays, it would sound insane to only stream 10 hours in a month.

But in 2007, Netflix had 6.3 million DVD subscribers.

The internet streaming services started on Windows-only devices before the addition of Apple users in 2008.

With the updated platform access, new users flooded the streaming services.

The other changes that were taking place was classic movies on VHS being phased out.

With streaming, users could access a seemingly endless supply of content on modern devices.

The problem Netflix first incurred was the opposite of endless streaming of titles.

Their watch now features debuted with only 1000 titles.

This was not a large enough selection to wipe out Blockbuster and other renting services.

So, where was the value in Netflix?

Why did the Motley Fool invest in Netflix?

The Motley Fool pictured Netflix in the modern era.

Netflix has partnership deals with television companies.

Additionally, Netflix has some of the newest entertainment on the platform not long after showing up on the silver screen.

At the time of Netflix’s stock issuance, Blockbuster, it’s largest rival, was seemingly taking the wind out of their sails.

The Motley Fool recognized what mattered in the long-term and how Netflix was better positioned for long term growth.

During the days of the Blockbuster-Netflix rivalry, Netflix was continually finding ways to provide its great service to the subscribers.

Netflix creation of it’s at-home streaming became a catalyst of growth and exponential expansion.

By analyzing the culture that was present in Netflix’s management, a culture of innovation and adaptation, Motley fool saw what many others missed.

Motley Fool foresaw what was to come of the streaming giant.

So, why didn’t everyone see Netflix as a winner all those years ago?

As investors, we sometimes miss the big picture.

The big picture I am referring to ties in with how the entire market segment may be shifting for the future.

Motley Fool saw that Blockbuster was one of the traditional brick-and-mortar stores that everyone knew was a one-stop-shop.

You go to the store, get your movies, and then return them.

This simplistic way of consumption is what led to Blockbuster’s overarching success.

So, what did Motley Fool see that we didn’t?

Motley Fool saw CHANGE.

There will always be a place for certain brick-and-mortar stores, such as groceries or prescription medicine.

But not all businesses must have a store.

Motley Fool was able to see a shift in the digital age fast approaching, including:

1. New technology on the horizon; and
2. Consumer preferences switched to convenience with non-essential goods and services.

Netflix started doing the entertainment business different.

Ideas that were ambitious and extremely difficult.

Few people could see the potential payoff from these drastic business model changes.

Motley Fool didn’t miss them.

You see, Netflix didn’t just rent movies like Blockbuster.

Netflix created a new a hassle-free DVD rental system by using the internet.

Netflix singlehanded created a new way to consumer movies and television shows from your very own home.

Netflix also started to invest in its own content creation.

As Blockbuster saw losses, Netflix was investing it creating its own sustainability that they called Netflix originals.

It was a no-brainer!

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