Today, I saw that a share of Netflix (NFLX) was sold for 932$.
On may 2nd 2022, that same share was sold for 180$. By then, there was a panic that followed bad numbers for subscription, users sharing accounts and other stuff like that.
I was very tempted to buy some shares. I noticed that the ROE and profit margin were interesting and everybody knew that it was a dominating business even though there were a few competitors and maybe some price war coming.
But I didn't buy any share. And today, after only two years and a half, I would have made a profit of about 750$ per share.
A performance similar to Meta/Facebook that dropped a lot and came back with strength within less than a year (about 88$ a share in october 2022 to more than 600$ today).
I'm obsessed about what happened to these two stocks. Because they represented huge bargains. It's like seeing a very special and beautiful girl in a bar that looks at you with insistence and you say to yourself: "I'll find a better moment to talk to her later in the evening".
Then, you wait and you wait, because you're not drunk enough. And eventually, that pretty girl was approached by other guys and there was never another better occasion.
One of the best metric for me is the profit margin. However, most of the companies with high profit margins are expensive. Sometimes they're very expensive. But, if you find dominating companies (like Meta, Netflix or Nvidia) in a moment were it looks like their fantastic growth of the recent years is becoming to slow down, it's probably a good moment to buy them.
Here's a list of companies with fantastic profit margins. It's a watch list for everybody because each one of these stocks offer a profit margin way beyond average. But not all of them operate in a high growth environement. Anyway, high profit margin and reasonable PE ratio = low risk (in my opinion).
Nvidia: 55%
Visa: 53%
United Therapeutics: 42%
Microsoft: 36%
Arista Networks: 36%
Novo Nordisk: 36%
Canadian National: 33%
Copart: 32%
Intuit: 30%
Meta: 29%
Zoetis: 29%
Factset Research: 29%
Adobe: 28%
Merry Christmas to you all (a day late, but whatever).
RépondreSupprimerI like your list and I share several of them including Visa, Microsoft, Adobe and Copart. To that list, I would add Monster Beverage and ASML. Regarding CNR, I know you spoke about this one in the last post, but I most admit that while it is indeed a great company with a duopoly and great ROE, I have a hard time seeing this company get to a price where it would offer a good return because the shareholder base know the value of such a company.
A random story about investing in Netflix follows: This man writes in to Seeking Alpha investing forum last week. He says: Years ago I bought this stock. It quickly proceeded to lose 80% of its value. Normally, I would sell such a stock, but in this case...not only did I not sell, but I kept buying more and more shares every chance I could. Today, I am a very wealthy man from what I made in my Netflix shares alone. I do not know what allowed him the conviction to hold his shares through an 80% drop and keep adding shares. No idea. He did not say in his brief comment on Seeking Alpha. I am old enough to know what Netflix started off as. Netflix at first was what we in quebec call a "Club Video"...I was in the same business. I rented movies out to people on VHS tapes. When they went to dvd discs, Netflix offered to mail the movie to the client and the client could mail it back in a couple of days. THAT was their first innovation from renting out films to walk in clientele then mailing the disc and getting it back via mail...and then they got into streaming. The rest is history. I saw netflix and google and tesla and amazon early on...but guess what? their p/e multiples were either insane or these companies made no profits for many years as they captured market share. Also, if you invested in say Amazon, you'd have to have endured drops as heavy as 90% to still be holding on to shares you bought early on. Who does that? Who can endure 90% downside?
RépondreSupprimer