Re: Scary post on Caps-- what's the rebuttal?

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By TMFBreakerDan
October 26, 2006

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[This references commentary found here:, posted by Klingsor4]

Hey Gang,

For what it's worth, I posted a rebuttal to that post.

I think that the post you're referring to is from Marko Djuranovic, who posts as Klingsor4. His financial analysis is extremely well thought out and he is very intelligent. But in my opinion, he leaves out lots of key stuff -

Value of great management.

Yet unseen "free plus" opportunities to leverage user base to make more money - for example, knowing which movies people watch may be incredibly valuable knowledge in terms of what products they buy. Surely someone who watches movies like "Kill Bill" is very different than somehow who watches "Pippy Longstocking."

He leaves out the MASSIVE size of their moat - if DVDs have 5-10 years left, if not more, no one is going to invest hundreds of millions in distribution centers to compete for a limited time. So this leaves NFLX as the top dog in a two dog race in which the other dog is a debt ridden me-too has been mockery that almost everyone hates for their crappy customer service and lame stores.

Why did Amazon stay out of the race? Why did Wal-Mart hike up its skirt and run screaming like a 1950's TV housewife that just saw a mouse?

And they ARE developing proprietary content and there is every reason to believe they will do this well.

The world is moving toward a situation in which digital movies will be played in large theaters and we may see re-releases of countless classic movies and even TV shows. This is what Mark Cuban is up to. So, the point being, NFLX could use it's software to help a guy like Cuban figure out which movies should be released where. Maybe NFLX software will reveal that people in Philadelphia would gladly pony up $10 to see Rocky on the big screen again. I believe that NFLX is going to be at the forefront or at least a massively relevant player in helping companies determine what to show where. And that there will be real money to be made off this by hitting lots of singles and doubles if no major "Titanic" style homers.

And what if Netflix goes international - say opens up in India, a country gaga for movies?

I don't know this for a fact, but I think that Marko is a value guy. These folks like to buy dollars for pennies and passionately try to avoid losses. They are often hemming and hawing about how X company might be great but it is too expensive. But for my money, too often they fail to place any hard value on the potential of great companies to continue excelling and to find opportunities that are not clearly displayed on spreadsheets and calculators.

I'm a comedy writer and a marketing guy, and I freely admit that I suck at running spreadsheets and analyzing complex financial statements. I'm what you'd call an artist as opposed to a scientist (a lover not a fighter if you will)... So, what I do is hear out both sides of an argument from the numbers guys and then pick a side. On Netflix, to me, the pro Netflix guys win this one by a wide, wide margin.

Shoot, when you see even a RAGING SKEPTIC value guy like Seth Jayson flip up a green thumb on Netflix in CAPS you can just hear Buffalo Springfield singing "there's something happening here, and what it is ain't exactly clear..."

That said, the sheer glory of Fooldom is the intelligence of the debate and there is nothing better than having value and growth guys battle it out. So thanks for calling that post to our attention and thanks to Marko for his analysis. Anyone who is bullish on a stock without knowing the bear case is guilty of investing based on something that sounds a lot like bullish but is quite different. :>

Fat Cash to All, Value Guys and Growth Guys Alike,


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