3 Top Movers: Netflix, Inc., F5 Networks, and Juniper Networks

These were the best-performing stocks in the S&P 500 this week.

Jan 26, 2014 at 1:00PM


Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

As turmoil in emerging markets began to taint sentiment in developed markets, U.S. stocks recorded their worst week since June 2012, with the S&P 500 losing 2.6%. The narrower Dow Jones Industrial Average (DJINDICES:^DJI), meanwhile, fared even worse, falling 3.5% -- its worst weekly decline since November 2011. Nevertheless, some stocks managed to buck the trend on company-specific news. The top-three performing stocks in the S&P 500 were technology stocks, or technology-assimilated: Netflix (NASDAQ:NFLX), F5 Networks (NASDAQ:FFIV), and Juniper Networks (NYSE:JNPR).

Netflix -- the best-performing stock in the S&P 500 in 2013 -- rose 17% on the week, as investors were impressed with the fourth quarter results the company announced on Wednesday. None of this "beat-by-a-penny" business for the streaming video provider: In the fourth quarter, Netflix earned $0.79 per share, where Wall Street was expecting just $0.66. Better yet, the company beat its own guidance for contribution margin (a company measure of profitability that excludes technology and development, and general and administrative costs) and net additions of U.S. subscribers, with 2.25 million for the latter.

Incredibly, in spite of Netflix's roaring stock price, the shares are cheaper now, on the basis of their forward price-to-earnings multiple, than they have been in at least 15 months -- a testament to the extraordinary performance of the underlying business. Still, with the shares at 92 times the next 12 months' earnings-per-share estimate, an old value hound like me would be hard-pressed to describe them as "cheap." I think Netflix is a terrific business (full disclosure: I'm a very satisfied customer), but it's hard for me to wrap my head around the valuation. As such, I will repeat what I have written before: I believe the stock is appropriate only for genuine long-term investors (i.e., with a multi-year holding period) with a healthy tolerance for volatility.

F5 Networks' stock was up 8.2% this week after the company announced better-than-expected fiscal first-quarter results. Adjusted earnings per share of $1.22 came in above the guidance range of $1.17 to $1.20 that management had provided in October. Crucially, F5 provided guidance for the current quarter ending March 31 of adjusted earnings per share of $1.23 to $1.26 on revenue of $408 million to $418 million, which exceeded analysts' forecasts of $1.21 and $404 million, respectively. (Wall Street has since raised its estimates.)

Juniper Networks (NYSE:JNPR) was the third-best performing stock in the S&P 500 this week, with a 6.6% gain, and, coincidentally, it was also the third–best performer the previous week. Last week, the catalyst for the share price increase was Elliott Management, an activist hedge fund that disclosed a 6.2% ownership stake and proposed "value creation initiatives." In its presentation, Elliott Management's Perspectives, it suggests that a $200 million reduction in operating expenses and a $3.5 billion share repurchase program could lift the stock price to $35 to $40.

This week, another activist hedge fund, Jana Partners, piled on, telling its investors in a letter that it has become one of Juniper's largest shareholders and advocating similar actions as those outlined by Elliott Management. Meanwhile, Juniper's fourth-quarter results, released on Thursday morning are just a footnote, even though the company beat estimates for earnings per share and revenue. That won't satisfy Elliott or Jana, with the latter calling for a greater "sense of urgency" from CEO Shaygan Kheradpir.

Having started on Jan. 1, Kheradpir has his work cut out for him. The company certainly doesn't appear to be ignoring the hedge funds -- in response to Juniper's statement, a company spokesman said (my emphasis) that "the board and management team have been comprehensively analyzing the company's priorities for some time, and we are finalizing our review with a sense of urgency."

Netflix was a huge winner in 2013; here's the one stock you must own for 2014
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Fool contributor Alex Dumortier, CFA, has no position in any stocks mentioned; you can follow him on Twitter: @longrunreturns. The Motley Fool recommends Netflix and owns shares of F5 Networks and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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