All things STOCKS

[UTVolax24]

I work at a HF here in NYC. Willing to help out as best I can (legally of course - no MNPI). Feel free to tag me in the future if you want my 2 cents.

In terms of Netflix - This is a company that will likely never become FCF positive. At the moment it’s a growing space with a huge TAM, but facing huge competitive pressures. Then it becomes how can Netflix generate positive net income and become FCF positive. The elasticity off demand will see pressure as you see increased competition and higher monthly rates. The problem becomes the timing of the restating lower, I have it has 2H2021, but could be sooner given the sub growth reported at Disney +. Also, if we ever experience a credit cycles it will be hard for the company to finance with a HY bond at ~8-10% or a Term Loan in a similar yield. With that being said a huge amount of value is assigned to being the first to the space and being a “verb” ie: Lets Uber, Netflix & Chill, Lets Seamless, etc etc etc. I personally wouldn’t buy Netflix if your looking over the next 12-24 months holding period. You could trade it if your comfortable with technical analysis.

 

[Thunder Good-Oil]

I work at a HF here in NYC. Willing to help out as best I can (legally of course - no MNPI). Anyone in Jacksonville for the Bowl game feel free to grab a beer!

Feel free to tag me in the future if you want my 2 cents.

Correction in 2020 or sometime after the election(s)?

 

[UTVolax24]

Correction in 2020 or sometime after the election(s)?

If EW / BS wins democratic nomination, yes... huge correction. Market is assigning little to no prospects of that at the moment. Largely speaking your seeing the market trade at peak multiples, with little to no prospects for revenue growth or earnings growth. What will push topline or bottom line higher? I can’t think of much. Typically most names trade of an EBITDA, EPS, CPS, or Sales Multiple on a 1 year fwd or 2 year fwd basis. If that’s the case, with less clarity into a year or two years fwd you should see multiple compress and discount rates rise, pushing valuations Lowe. Credit market, until this last month was signaling an increased likelihood of a recession (High Yield credit market). The underlying biggest question marks are FED, Trump, China, Election. I personally think you see the trade war through the election, as China has absolutely no reason to agree to anything unless Trump wins again.

I personally don’t think we see a correction, as some of you may define it as negative returns. I think we are extended period of no returns. Which makes this a much more of a stock pickers game and means your regular ETFs and Index funds will be hurting.

 

[Thunder Good-Oil]

I don't see any reason to agree to a trade deal with China. I hope that the administration doesn't budge on the concessions that they're demanding.

I think that the gay mayor might beat out the Socialists. And Biden is damaged goods. If Budajudge (sp) had a better background he could be a threat.

 

[UTVolax24]

I don't see any reason to agree to a trade deal with China. I hope that the administration doesn't budge on the concessions that they're demanding.

I think that the gay mayor might beat out the Socialists. And Biden is damaged goods. If Budajudge (sp) had a better background he could be a threat.

The problem is Trump might need a trade deal heading into the election in order to win a second term. China I think is more likely to hold out than Trump. The US has no carrot to hold to China.

Pete Buttigieg is the best democratic candidate in my opinion, besides Biden and Bloomberg, if you are a conservative, moderate, or independent. He’s also the above described “gay mayor”. The problem I see is in the math, there’s a LARGE % between Sanders and EW. That you assume would all support one or the other. >40%

 

[Thunder Good-Oil]

The problem is Trump might need a trade deal heading into the election in order to win a second term. China I think is more likely to hold out than Trump. The US has no carrot to hold to China.

Pete Buttigieg is the best democratic candidate in my opinion, besides Biden and Bloomberg, if you are a conservative, moderate, or independent. He’s also the above described “gay mayor”. The problem I see is in the math, there’s a LARGE % between Sanders and EW. That you assume would all support one or the other. >40%

I forgot about the billionaire former mayor.

There's a "Stocks" thread in the Politics forum that's better suited for this discussion. "Stocks" in this forum is more for education, stock picks, investing in general. There are also crypto threads for those discussions, but it gets dragged into "Stocks" as well.

 

[Thunder Good-Oil]

But... I don't think that POTUS needs a deal with China if the economic numbers, especially employment, stay on track.

I think that trade with Mexico and the small Pacific rim countries can offset a no China deal environment. The UK is also going to be a much bigger trading partner. I wish that Germany and France would Gexit and Frexit, but that's a long term possibility if at all. A prosperous UK would expedite it.

 

[Thunder Good-Oil]

What I struggle with right now is where to invest? Short duration bond funds are okay to park cash right now I suppose. LT debt just isn't attractive. New issues are ridiculous... they're all about early investors cashing out instead of raising capital. You're right about having to stock pick. Boeing and Spirit look favorable IMO, but perhaps the bottom hasn't happened yet. Maybe the Mexican ETF.

 

[Thunder Good-Oil]

I work at a HF here in NYC. Willing to help out as best I can (legally of course - no MNPI). Feel free to tag me in the future if you want my 2 cents.

In terms of Netflix - This is a company that will likely never become FCF positive. At the moment it’s a growing space with a huge TAM, but facing huge competitive pressures. Then it becomes how can Netflix generate positive net income and become FCF positive. The elasticity off demand will see pressure as you see increased competition and higher monthly rates. The problem becomes the timing of the restating lower, I have it has 2H2021, but could be sooner given the sub growth reported at Disney +. Also, if we ever experience a credit cycles it will be hard for the company to finance with a HY bond at ~8-10% or a Term Loan in a similar yield. With that being said a huge amount of value is assigned to being the first to the space and being a “verb” ie: Lets Uber, Netflix & Chill, Lets Seamless, etc etc etc. I personally wouldn’t buy Netflix if your looking over the next 12-24 months holding period. You could trade it if your comfortable with technical analysis.

The thing that I've never liked about Netflix is that, unlike Disney, they own very little of their program library. They spend a ton commissioning newly produced content, but they only have exclusivity for a few years.

With so many big players getting into the paid streaming space, I think that they'll be constrained growing revenues since they're near full penetration domestically. And building up their content in other languages is fairly expensive.

Their competition has lots of cash. Especially AMZN, FB, Google/YouTube/Alpha, and AAPL. I doubt that MSFT sits this one out.

 

[UTVolax24]

I forgot about the billionaire former mayor.

There's a "Stocks" thread in the Politics forum that's better suited for this discussion. "Stocks" in this forum is more for education, stock picks, investing in general. There are also crypto threads for those discussions, but it gets dragged into "Stocks" as well.

Just posted in that chat! Thanks!

But... I don't think that POTUS needs a deal with China if the economic numbers, especially employment, stay on track.

I think that trade with Mexico and the small Pacific rim countries can offset a no China deal environment. The UK is also going to be a much bigger trading partner. I wish that Germany and France would Gexit and Frexit, but that's a long term possibility if at all. A prosperous UK would expedite it.

You're so late cycle. Banking on 9 more months of positive economic data is very hard to fathom. Don't think anyone believes that is possible. In which case, we reach July and the market starts to turn on him, the only real lever he can pull are additional rate cuts and a trade deal with China. He's really pinning himself in a corner. From a game theory perspective, the ball is entirely in China's court. Corporations have done a tremendous job of moving out and away from China, but the CapEx spend will be aggregious and wont likely be domestic, meaning more pressure on a trade deal.

What I struggle with right now is where to invest? Short duration bond funds are okay to park cash right now I suppose. LT debt just isn't attractive. New issues are ridiculous... they're all about early investors cashing out instead of raising capital. You're right about having to stock pick. Boeing and Spirit look favorable IMO, but perhaps the bottom hasn't happened yet. Maybe the Mexican ETF.

Personally, I'd avoid all debt that isnt short duration and up in quality. I like corporate debt that is A rated. Anything BBB rated or HY rated is prime for a serious shift in valuation. I think the same goes for equities. I'd focus on equities with tons of levers to pull, strong IG credit rating, and FCF through the cycles. Its to uncertain of a next year plus. I think EM is still extremely undervalued, but if I tend to believe (against the grain) that its undervalued on a RelVal basis for a reason.

Broadly speaking:
Buy A rated Credit
Sell BBB / HY Credit
Sell Commodities (O & G)
Slight buy on EM
Sell Small Cap
Buy Blue Chip, A credit rated Equities
Buy Rates
Sell DXY
Etc. etc. etc.

Can go more in-depth later, if necessary.

 

[Thunder Good-Oil]

BTW, FCF = Free Cash Flow, EBITDA = Earnings before interest, taxes, depreciation, and amortization, EM = Emerging Markets, HF = Hedge Fund (or Home Federal for the Knoxvillians), and TAM = Total Addressable Market. The aren't too many CPAs and even fewer CFAs reading the forum.

 

[Go aeiou]

The pickings are slim.
Seems stocks are fully priced and bonds pay almost nothing.
My perspective as a retiree.

 

[knucklehead_vol]

BTW, FCF = Free Cash Flow, EBITDA = Earnings before interest, taxes, depreciation, and amortization, EM = Emerging Markets, HF = Hedge Fund (or Home Federal for the Knoxvillians), and TAM = Total Addressable Market. The aren't too many CPAs and even fewer CFAs reading the forum.

I read it.

 

[bignewt]

Netflix up over $330 today. All they had to do was report international subs.

 

[UTVolax24]

Netflix up over $330 today. All they had to do was report international subs.

Netflix’s huge growth has to be international. They’ve reached a plateau in NAm that will show decreasing marginal returns And potentially negative. The problem I have with International growth is there competitors already have a huge international footprint with a new focus on streaming, where as Netflix is expanding into international. It’s a been a wild run for the stock but you’ll continue to see week comps in NorAm which will place pressure on the stock, with the bulls pointing to international sub growth. Goes back to why I think it’s a value trap until the end of 2020. I have my eye on it as a short at year end 2020, but nothing in the meantime.

The pickings are slim.
Seems stocks are fully priced and bonds pay almost nothing.
My perspective as a retiree.

It’s really stock / bond specific. Right now I love shorting MIK debt (hedge using a long equity), buy ENDP Unsecured debt, long PRXL debt, cap structure arb CYH. On the equity side I like buy E&P equities vs shorting lowery quality E&P debt (think Long COP vs Short WLL). I like ENDP equity if you can stomach the opioid headline risks. Like SPN equity (which is hard to stomach as well). Short GRUB equity. Buy Salesforce. Buy Apple. These are just a few examples; In this market it’s extremely difficult to find opportunities skewed in your favor.

BTW, FCF = Free Cash Flow, EBITDA = Earnings before interest, taxes, depreciation, and amortization, EM = Emerging Markets, HF = Hedge Fund (or Home Federal for the Knoxvillians), and TAM = Total Addressable Market. The aren't too many CPAs and even fewer CFAs reading the forum.

Yep, I tend to use (and most in the industry do as well) Adj EBITDA removing one off charges that are not normal business operations. HF in this case is Hedge Fund.

 

[bignewt]

Netflix’s huge growth has to be international. They’ve reached a plateau in NAm that will show decreasing marginal returns And potentially negative. The problem I have with International growth is there competitors already have a huge international footprint with a new focus on streaming, where as Netflix is expanding into international. It’s a been a wild run for the stock but you’ll continue to see week comps in NorAm which will place pressure on the stock, with the bulls pointing to international sub growth. Goes back to why I think it’s a value trap until the end of 2020. I have my eye on it as a short at year end 2020, but nothing in the meantime.



It’s really stock / bond specific. Right now I love shorting MIK debt (hedge using a long equity), buy ENDP Unsecured debt, long PRXL debt, cap structure arb CYH. On the equity side I like buy E&P equities vs shorting lowery quality E&P debt (think Long COP vs Short WLL). I like ENDP equity if you can stomach the opioid headline risks. Like SPN equity (which is hard to stomach as well). Short GRUB equity. Buy Salesforce. Buy Apple. These are just a few examples; In this market it’s extremely difficult to find opportunities skewed in your favor.



Yep, I tend to use (and most in the industry do as well) Adj EBITDA removing one off charges that are not normal business operations. HF in this case is Hedge Fund.

Yeah all you guys keep talking about how they can't sustain, their debt, etc, and I keep making bank on it.

 

[UTVolax24]

Yeah all you guys keep talking about how they can't sustain, their debt, etc, and I keep making bank on it.

That’s the beautiful thing about the market, doesn’t mean your right or wrong, just means your right at the moment. I was short MDR, PRTY, XELA/EXLINT, GRUB. All 4 moved against me for a period of time and made me feel idiotic. All 3 are now largely worthless. MDR as a great example, I shorted the debt at 70, 75, 85, 90, and 95... told over and over again I was a moron and wrong, bonds are now at 10. Just because you’re correct at a moment in time doesn’t mean you’re thesis is correct. It’s a dangerous game to play. The key is to never be the first to a trade.

I always tell retail investors to understand risk tolerance and continuous evaluation of risk reward skew.


Year to Date:
Netflix: +24%
IXP: +23%
XLC: +30%
VOX: +27%
SPX: +28%

Tells you you were NOT better off owning Netflix....

 

[Thunder Good-Oil]

Yep, I tend to use (and most in the industry do as well) Adj EBITDA removing one off charges that are not normal business operations. HF in this case is Hedge Fund.

I seriously doubt that any board readers thought that there is a Home Federal branch in NYC.

 

[Thunder Good-Oil]

Year to Date:
Netflix: +24%
IXP: +23%
XLC: +30%
VOX: +27%
SPX: +28%

Tells you you were NOT better off owning Netflix....

Newt has owned Netflix far longer than since the 2018 close.

 

[UTVolax24]

Newt has owned Netflix far longer than since the 2018 close.

Look at the attachment - shows buy vs hold vs sell recommendations. It’s been a consensus long for the last 5 years. Granted this is Sell-Side recommendations. Many of the buy-side was extremely long prior to 2019. Entering 2019 people needed to find what was going to push it another leg higher outside of market beta, and people are still struggling to find that catalyst or fundamental. Had you been short the stock - which is largely done by shorting Netflix vs SPY or Media related ETF, you would’ve made money. I think if you asked 100 individuals in 2015 if they had to buy or sell Netflix until 2020, 100/100 would’ve said buy (we were long in 2015-2018 and as I’ve mentioned I’m neutral until 3Q or 4Q 2020, with a view being short). If you asked people today if you should buy or sell in 2020 with a 1 year + investment horizon... the skew would be far more even and the risk reward skew is likely much more against you.

 

[Thunder Good-Oil]

Look at the attachment - shows buy vs hold vs sell recommendations. It’s been a consensus long for the last 5 years. Granted this is Sell-Side recommendations. Many of the buy-side was extremely long prior to 2019. Entering 2019 people needed to find what was going to push it another leg higher outside of market beta, and people are still struggling to find that catalyst or fundamental. Had you been short the stock - which is largely done by shorting Netflix vs SPY or Media related ETF, you would’ve made money. I think if you asked 100 individuals in 2015 if they had to buy or sell Netflix until 2020, 100/100 would’ve said buy (we were long in 2015-2018 and as I’ve mentioned I’m neutral until 3Q or 4Q 2020, with a view being short). If you asked people today if you should buy or sell in 2020 with a 1 year + investment horizon... the skew would be far more even and the risk reward skew is likely much more against you.

Oh, I wouldn't buy and hold Netflix for the mid or long haul. But it's certainly tradable with the volatility.

Thanks for bringing the knowledge.

 

[Thunder Good-Oil]

Netflix’s huge growth has to be international. They’ve reached a plateau in NAm that will show decreasing marginal returns And potentially negative. The problem I have with International growth is there competitors already have a huge international footprint with a new focus on streaming, where as Netflix is expanding into international. It’s a been a wild run for the stock but you’ll continue to see week comps in NorAm which will place pressure on the stock, with the bulls pointing to international sub growth. Goes back to why I think it’s a value trap until the end of 2020. I have my eye on it as a short.

I haven't read their 10-k lately, but IMO domestic margins aren't necessarily destined to erode in the near term. They have brilliant management that would fully understand they've approached maximum distribution penetration and the competition is more of a longer term concern. If they do plan to continue significantly increasing their program acquisition spending, then the bottom line will languish. But assuming they're using accelerated amortization of those licenses and their spending levels off they could see a bump in profitability. Programming costs are typically by far the largest expense for content providers... although Netflix is unique in that they provide AND deliver the content.

They probably will need to build in an advertising revenue model in order to grow in the long run. Advertising revenues are much larger than distribution fees for the content providers.

 

[bignewt]

Newt has owned Netflix far longer than since the 2018 close.

I bought it at $98 and have sold some at $335 and $305.

 

[UTVolax24]

I bought it at $98 and have sold some at $335 and $305.

My man... A+ trade! Can’t argue those returns.

 

[Big Gucci Sosa]

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