3 Stock Picks for Frank Underwood

If you're like the rest of America, you've been glued to Netflix's (NASDAQ: NFLX  ) sensational series House of Cards --or you've already binge-watched and finished the season. The show with a $100 million budget stars Kevin Spacey as Frank Underwood, a cunning congressman who uses deceit, backrubs, and murder to ascend to the Vice Presidency.

Underwood brings his flare for scandal and risk to investing -- here are three stocks he'd pick.

Pick one
What else but Netflix? The company put Frank Underwood on the map with House of Cards, Netflix's latest move in a ploy to enter the TV show production arena. This makes sense as Netflix exists to stream video entertainment to viewers -- why not make its own shows?

Of course, Frank Underwood never makes a move unless it's in his self-interest. How does Netflix benefit from the smash hit House of Cards? In simple terms, rising third-party content prices discourage Netflix from buying others' entertainment. Netflix would rather make its own exclusive shows that are so good, they draw in new subscriber-addicts.

Just like Frank Underwood, Netflix trusts nobody -- including the movie companies with which it does business. With House of Cards, Netflix is cutting ties with allies to forge its own growth. That's the type of cutthroat strategic thinking that made Frank Underwood Vice President.

Pick two
When watching House of Cards, Netflix's 33.4 million United States subscribers would be hard-pressed to see Frank Underwood (or any male character) dressed in less than a suit. Washington D.C. runs on coffee, ambition, and silk ties --Frank Underwood knows this.

That's why Frank would have applauded menswear retailer Jos. A. Bank's (NASDAQ: JOSB  ) game-changing move last week: buying outdoor clothing company Eddie Bauer for $825 million. The deal came in the midst of Jos. A. Bank's acquisition negotiations with rival Men's Wearhouse (NYSE: MW  ) , which could turn the competitors into partners.

Jos. A. Bank offered to buy its larger rival Men's Wearhouse in 2013; Men's Wearhouse then said, "You're gonna like the way we buy you out, I guarantee it" and counter-offered. Jos. A. Bank's acquisition of Eddie Bauer may be a tactic to increase its own buyout price -- the deal contains a condition that allows Jos. A. Bank to back out if it gets a "superior proposal."

Frank Underwood admires those like Jos. A. Bank who take great risks and "play to win."

Pick three
Frank Underwood has his share of vices and character flaws -- one of which is smoking. Though smoking cigarettes seems tame compared to Frank's hobbies of murder and bribery, he's been trying to curb his nicotine urges in Season 2 by smoking e-cigarettes.

Whether Frank's smoking old-fashioned cigarettes or e-cigarettes, he's surely a fan of Big Tobacco's front-runner, Philip Morris (NYSE: PM  ) . Philip Morris has been America's leading cigarette brand for nearly a century, but in recent decades the company has suffered (despite reaping an 87% gross margin in 2012) from tobacco's bad rap and restrictive regulations from Capitol Hill.

Frank Underwood and Philip Morris both profit at others' expense: while Frank will betray close friends just to get ahead, Philip Morris' revenue depends on tobacco addicts. Yet both Frank and Philip know how to manipulate a bad situation to get the best outcome: in the face of declining cigarette sales, Philip Morris will soon launch MarkTen e-cigarettes nationally.

Tobacco smokers like Underwood are buying $2 billion of e-cigarettes each year in America. If Philip Morris plays the right cards and achieves "e-vapor leadership" as it intends, better days for this company could lay ahead.

Foolish bottom line
Frank Underwood thrives on risk in politics as well as investing -- just because he'd pick these three disruptive stocks doesn't mean they're right for Foolish investors. A few risks: Netflix could be overpriced; Jos. A. Bank's acquisition of Eddie Bauer could turn ugly; and Philip Morris' foray into e-cigarettes could flop or fail to offset other declines in revenue.

If you're an investor who thrives on high risk-reward stocks like Frank, invest if you dare.

Can Netflix take over your TV?
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.


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