Netflix: A Favorite Stock

Moving on the market, I recently wrote a piece titled “An Important Message About Fear and Greed.”

In it I explained how markets peaked at the point of maximum optimism and bottomed at the point of maximum pessimism.

I wrote, “the best way to invest is to Buy at the point of peak pessimism, and Sell at the point of peak optimism.”

And I explained that the present was a point of very great pessimism, and therefore a very good time to buy!

Finally, to counter the protests of those who would argue that today’s special fundamental troubles override this sentiment indicator, I wrote this:

“One final point: Some people will tell you, “It’s different this time,” and they will cite various fundamental facts—our huge national debt, Social Security, Congress, demographics, China, terrorism, peak oil, immigration, global warming—as reasons that investing in the future will not pay.

“To which I say, “Baloney!”

“Throughout history, there have always been people saying “it’s different this time,” but bull markets and bear markets have repeatedly proved the naysayers wrong.  And why?  Because bull and bear markets are driven by changes in perception that drive human emotions from the depths of despair to the heights of euphoria and than back down again, over and over.

“Over the decades and the centuries, the economic facts change and the technologies change, but human nature is ever dependable in its variability.

“And THAT is why I am confident that the market’s next major move will be up.”

Well, since then, not a lot has changed, fundamentally.  We’ve had a nice report on manufacturing, and growth in China is strong, but the stats on unemployment, housing, national debt, etc., remain downright rotten.

Investors—and would-be investors—are still fearful of a double-dip recession, among other things.  To most of them, making aggressive investments in growth stocks at this stage—when so much is uncertain—appears just foolish.

Yet we have had a big change in the market!  Last Wednesday’s 254-point Dow surge marked what we call a follow-through day.  Friday’s 128-point advance confirmed the signal.  Together they tell us the selling pressures have ebbed (all the sellers have exhausted their ammunition) and now the buyers are in control again, and they will remain in control until optimism reigns again.

So I’m telling readers of Cabot Stock of the Month to buy, and one of my favorite stocks is Netflix (NFLX), which I recommended to subscribers to my Cabot Stock of the Month back in February when it was trading at 65.

Well, it’s now trading north of 135, and I still like it, mainly because of its growing role in bringing movies, TV shows and more into your home.  I’ve been a customer since 2003, when all content arrived through the mail, but today I have a Roku box that streams Netflix content straight to my TV … and I love it.  The remote has just a few buttons.  It’s easy as pie to work.  And Netflix loves when I stream content instead of ordering a DVD, because it costs them only pennies to stream a movie!

And last week Steve Jobs announced a new version of Apple TV that follows the Roku model.  No more will users of Apple TV (there weren’t that many to begin with) have to deal with synching and storage issues.  From here on, Apple TV (list price $99) will simply stream rented content, from the iTunes store AND the Netflix library as well as ABC and Fox TV … and I predict it will be a big hit.

Now, technically, NFLX looks a tad extended here, so if you don’t own it yet, I think you should wait for a lower-risk entry point.  In the meantime, I suggest you take a no-risk trial subscription to Cabot Stock of the Month (it’s just $49) and see what stocks ARE attractive to me today!