Why Carl Icahn's Decision to Cash In on Netflix Shouldn't Worry Investors

Let's look at what was really behind this guru's decision to sell.

Feb 27, 2014 at 11:19AM

In August 2012, shares of Netflix (NASDAQ:NFLX) were struggling, and investors couldn't seem to find the exit fast enough.

After surging to more than $300 per share by the middle of 2011, the company's stock dropped more than 80%. Customers were up in arms over a poorly executed price hike, and the video streamer made the ill-fated decision to spin off a Qwikster DVD service, only to take it back a few days later.

That's when famed investor Carl Icahn decided to start buying up shares, eventually amassing ownership of nearly 10%.

We already knew that Icahn sold a large chunk of his shares back in October, but after he filed his holding company's 13F document with the SEC, it seems he's still a big believer in Netflix. Read below to find out why.

Netflix

 

Investors should never decide to buy or sell a stock based on what one investor is doing, even if that investor is Carl Icahn.

But for those worried that Icahn didn't believe in Netflix anymore, he addressed his reasons for selling head-on: "As a hardened veteran of seven bear markets, I have learned that when you are lucky and/or smart enough to have made a total return of 457 percent in only 14 months it is time to take some of the chips off the table." 

Now we know for sure that Icahn meant it. As it stood on Dec. 31, his holding company still owned 2.7 million shares of Netflix, worth roughly $1.18 billion.

That stake is worth considerably more just two months later, likely in the ballpark of $1.22 billion. That's because Netflix added 2.33 million domestic subscribers at the end of 2013 and just announced a deal with Comcast (NASDAQ:CMCSA) to ensure that subscribers won't have to deal with slow and sputtering streaming feeds, which could prove deadly for Netflix as it becomes more popular.

Investors should stay tuned when Icahn files his next 13F to see if he still feels as lucky to be holding shares after the recent run-up.

Imagine buying Netflix at $11.30
That's where the stock price was when Motley Fool co-founder David Gardner recommended buying it back in 2003. But he's more than a one-trick pony. In fact, one of his favorite stocks recently became a 100-bagger. And he's ready to do it again.

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Brian Stoffel has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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