So you're planning to buy a new stock, and have narrowed your choices down to Netflix (NASDAQ:NFLX) or Twitter (NYSE:TWTR). Kudos for getting your financial ducks in a row, and thanks for checking up on which ticker would fit your portfolio better.
Spoiler alert: Twitter doesn't stand a chance in this pairing.
The long and short of it
Twitter runs a once-innovative service, but the blue bird is starting to show its age.
The micro-blogging tool is famous for its hard 140-character limit to message sizes, but recent changes have started to lift those restrictions. Links and images no longer count against the message-size limits, and the entire concept of character limits may fall by the wayside this year. Attempts to monetize tweeting have generally led to slowdowns in user growth. Lifting the character restrictions would not lead to a stronger business. Instead, Twitter would become just another messaging service, devoid of its most defining characteristic and still searching for a legitimate money-making strategy.
But that's the all that's on the table for Twitter and its owners these days. At best, Twitter investors may hope for a quick acquisition. Even then, the final price tag would leave most shareholders holding the bag with large losses.
Fellow Fool Evan Niu argues that Twitter can survive, but even he wouldn't call it a "compelling or promising investment."
I wouldn't touch Twitter shares with a 10-foot selfie stick. You shouldn't, either.
The big picture
In the red corner, Netflix has just built a global network of digital video services. You can stream its movies and TV shows anywhere but China and a few politically troubled territories. The company is building a strong catalog of Netflix Originals, and will expand its full-length movie production efforts going forward.
The company has raised subscription prices without damaging its subscriber growth, didn't hesitate to essentially kill its dominant DVD mailer service when the infrastructure necessary for high-quality digital streaming came along, and seems likely to stay on its proverbial toes when the next market-disrupting revolution comes along.
This is the largest holding in my personal real-world portfolio, for two good reasons:
- My modest original investment has grown more than tenfold in just five years. No other position can hold a candle to that fantastic gain.
- I expect Netflix to continue growing for years to come, so I'm not taking any of my profits off the table.
This is, in fact, still the one stock and company I trust more than any other to deliver strong returns over the next five to 10 years.
Sorry, Twitter. You never stood a chance in this battle of household names.