I manage a real-money investment portfolio of 30 stocks. That's after trimming a couple of names in a rebalancing review over the holidays. All of the tickers in my portfolio today have earned their spot more than once, and I fully intend to hold them for the foreseeable future. A handful of these battle-tested tickers deserve the further distinction of being the unshakable pillars of my investing strategy in the long run, and it would be a big surprise if I found myself selling them before I retire -- and long after that, even. This exclusive group will stay in my account forever, for all intents and purposes.
Here's why Netflix (NASDAQ:NFLX) is one of the six stocks I'll never sell.
There's a history here
Netflix is not a new addition to my real-world holdings. I bought my first shares of what then was a DVD-rentals-by-mail company way back in 2005. A few months later, I spent weeks doing a deep dive on the movie rental industry and walked away with a firm conviction that Netflix would win that war.
The company operated with a unique commitment to a great customer experience while rivals like Blockbuster and Movie Gallery were nickel-and-diming their video rental clients from every possible angle. With a winning recipe in hand, Netflix proceeded to disrupt the industry. The army of head-to-head competitors thinned out in a hurry and nowadays, Netflix is the only game in town for DVD rentals.
By the summer of 2011, my humble Netflix shares had accumulated a return of 2,740%. That's when the company moved its video-streaming service up from being a free add-on to the DVD platform, making it a completely separate product under the name Qwikster.
This event burnished Netflix's status as a never-sell stock for me because CEO Reed Hastings was doing the right thing in spite of massive shareholder pressure to simply keep the good times rolling with the DVD service. As we all know now, streaming video is a much more scalable business with far lower distribution costs and a truly global reach. Waving goodbye to the industry-defining monster of a DVD service was never going to be easy, even if Hastings and his management team could see the long-term growth potential of the streaming business.
I bought more Netflix shares when Hastings gave up on the Qwikster name but remained committed to the idea of running two separate Netflix businesses. Share prices plunged 71% from the peak in July amid massive spikes of panic-selling. To me, that was an obvious buying window.
The long-term view
The company has a vision of a massive entertainment empire, based on a huge and fast-growing user base and powered by a continuous stream of original content in almost every conceivable niche.
Management isn't shy about sharing its long-term plans in great detail and many old-school entertainment giants are trying their hands at the video-streaming market. But Netflix has some advantages that are difficult to copy, such as two decades of video-rental and streaming operations, nearly 200 million paying subscribers, a brand name with global recognition, highly polished user interfaces on every platform from web browsers to smartphones, and a firm commitment to ad-free video services supported by monthly subscription fees. Many competitors can copy one or two of these qualities -- and Walt Disney (NYSE:DIS) threatens to become a worthy rival on the global stage -- but absolutely nobody can match all of them.
The stock is also incredibly resilient. Share prices have crashed hard on many occasions, but each one of the short-lived panic sales has become nothing more than a small speed bump on the road to continued growth. Netflix shares have posted a 4,220% return since the Qwikster-based fire sale, 335% over the last five years, and 47% in 2020 alone. The road ahead may be bumpy but this investment vehicle comes with a luxurious ability to ride on through all the shocks and jolts.
Netflix's big secret
Now you know how Netflix joined my exclusive club of tickers that I'll never sell. The company isn't afraid to change with the times, leading the change from the front if possible -- even if that means abandoning a smaller market where it already vanquished every rival and destroyed every tradition.
It's all about giving the customer the best possible entertainment experience and value for their money. If you build it, they will come. Maybe that means that Netflix will walk away from the video-streaming sector it built, perhaps 10 or 20 years from now. If so, I'll hold on to my shares and take a good look at what the company's next big idea is. Maybe I'll buy more if the stock price falls through the floor in another investor panic. Hastings couldn't give up on the DVD service until the streaming platform was ready to rock, and he won't move on to whatever's next until the time is right for the next big step.
The next wholesale strategy shift is definitely years, maybe decades, away. I can't wait to see it happen, watching my Netflix investment crush the stock market along the way. This fantastic company is a buy at pretty much any price because I trust Netflix to stay relevant and strong no matter how much the entertainment market might change in my lifetime.