[sws_gray_box] Editor’s Note: To give you a small taste of what one of our endorsed experts has to offer to his students and trading-alerts subscribers, we’re providing the full 11-28-18 commentary from Jeff Bishop.
Jeff is widely recognized as the Mensa Trader, as he’s part of the upper 2-percent of the general population in IQ. This intellect-prowess has turned him into an expert at advanced mathematics, and a millionaire many times over.
The good news for you? You don’t need to be such a numbers genius. You can piggy-back off his skills and incredible results as he runs short-term trading strategies, using stocks, options and leveraged ETFs.[/sws_gray_box]
[ From a November 28th 2018 Weekly Money Multiplier Subscriber-only email ]
I plan to make a new purchase for my long-term portfolio soon. I’ll start building a position in NFLX stock.
NFLX has dropped over 30% from its high just a few months ago. Granted, I think it was too overvalued at that price to start with and right around here makes a lot more sense.
The stock is still very expensive though on a lot of measures… P/E ratio of 92, while the industry is about 20… Price to book value of 23 when the industry is around 9… A dividend of, well there is no dividend.
This is certainly not a value stock, but that is not what I am eyeing here.
I think there is a good chance that one of the tech monsters gobbles up NFLX next year, or the price climbs back well over $300. Either way is a good result for investors.
The reason this is a juicy target for the big boys (think Apple, Amazon, maybe even Verizon?) is that large tech stocks are flush with cash and nowhere to spend it. This might sound like a foreign concept to you if you’re looking to pay for your kid’s wedding, save for retirement, or even pay the rent this month but these big tech stocks don’t have those problems.
Their problem is what to do with the literal mountains of cash piling up each quarter from people buying all their products all over the world. It is one of the best problems to have as a business.
They simply announce they will go into the market and start buying their own stock. Shareholders love this and it helps support stock prices of course.
But it has no fundamental change for the company’s growth. NFLX is actually growing all over the planet still. Tech companies are desperate for more growth and NFLX makes a very easy way for these companies to grow even faster.
Think about this. NFLX has grown from 23M subscribers to over 137M in just 6 years. It is still growing at a fast clip.
You may not realize this giant is only getting bigger, but it is. While almost every family in the US has NFLX access (at least those who want it) there is a large portion of the rest of the world where NFLX is still expanding into.
It has become a “utility” of the modern digital age. People are expected to pay the $12/mo for access to the massive video library, even if they don’t use it much.
Who could buy NFLX? Well, AAPL comes to mind right away. They are sitting on nearly $300 BILLION in cash right now even after a large series of stock buybacks. It’s hard to move the needle on a business this big, but NFLX (which is valued at a “paltry” $115B) could be scooped up with one check signed by Mr. Cook.
Amazon also wants to build out their video distribution. They are doing a great job, but NFLX certainly is a tough competitor out there and shows no signs of slowing down. What better way for AMZN to pick up 137 million new paying accounts?
I see Verizon as a wildcard in this. They are very aggressive on growth, having scooped up Yahoo, HuffPo, AOL and other properties recently. NFLX must make all the execs salivate when they think about picking up a jewel like this.
Verizon is saddled with a lot of debt though, and this would be a tough acquisition to make. I don’t know if they have the stomach for it, but with a high stock price and a CEO looking for a way to impress Wall Street anything could happen.
All in all, I see a lot of upside here and I’m ready to make my move.
Yesterday was a wild one and I chose mainly to sit out though I did make a few moves.
I picked up a new position in GS. I really like this one and I added more to it at a higher price even after the initial alert.
I sold half of my AAPL calls for a loss, then bought back some of them at a higher price later in the day when it was clear the market was done selling the stock. I hate to do that, but it was the right move to make.
I sold half of my SPY calls to lock in a nice profit but I intend to keep the other half for a while longer. It is just hard to sell the market here for me, I want to go long.
I also added to the VFC position. I doubled up @ $1.70 so my new average is $1.95 as you will see in the live portfolio today.
I still might make some new moves, though most of the stocks I wanted to buy have already started to make a turn higher. I don’t think I want to chase them right now.
Have a great day out there and be very selective in your trading.
To YOUR success!
[sws_red_box] ACTION TO TAKE: Sign-up here to get a walk-through from Jeff of 7 REAL MONEY trades… [/sws_red_box]