Never is a very long time, but there are a few stocks that I don't intend to sell before I retire, at the very least. For all intents and purposes, those are my "forever holdings."
Chief among them is Netflix (NFLX +3.23%). Let me tell you why this stock holds a permanent place in my real-money investment portfolio, and why I still recommend buying it today.
Image source: Getty Images.
One quality to rule them all
My favorite stocks have one important thing in common -- their leaders are not afraid to change their business plans in response to changing market conditions. In many cases, you'll find my heroes leading the charge and defining the rules of the new market.
I'm talking about Amazon.com launching the first serious cloud-computing platform as a side project. It then leaned in on that idea until it started generating most of the e-tailer's operating profits.
I mean Tesla explicitly setting up the electric-car business just to nudge the auto industry in a more environmentally conscious direction. It also provided seed money for the real long-term plan of revolutionizing energy production and consumption.
IBM (IBM +2.06%) is leading the charge into cloud-based services and artificial intelligence, even if it means abandoning the lucrative hardware business of the previous decade. This company has already been around for 100 years, shifting gears many times along the way.
As for Netflix, I shouldn't have to remind you that the company turned the video-rental market inside out with its red DVD mailer envelopes, only to refocus on video streaming services in 2011. The DVD operation is still around, but its results are mere rounding errors next to Netflix's global-streaming business. The strategy shift was controversial at first, but absolutely the right choice in the long run.
That's what winners do.
Image source: Netflix.
What's next for Netflix?
The digital-video veteran has many shareholder-friendly habits. For instance, management keeps investors up to date with their long-term plans in a frequently updated document on the investor-relations site.
The long-term-view plan makes it clear that Netflix intends to stick with the digital-streaming platform for the foreseeable future. Unlike the DVD mailers, this technology addresses a global market with minimal back-end infrastructure costs. The success of Netflix's streaming business depends on the company's ability to create, acquire, or lease high-quality content that appeals to viewers with varied tastes in nearly 200 separate markets.
"We are making great headway with our slate of original series, which is a rapidly growing proportion of our spending," the strategy-statement says. "Any linear network would be proud to show them."
In the long run, Netflix aims to take the place of cable TV and other entertainment-focused media channels in most markets around the world. We're talking about 1.8 billion pay-TV households globally, and Netflix accounts for just 208 million of those accounts. That works out to a market share of less than 12%, leaving lots of room for growth as broadband services and reliable payment options become widely available everywhere.
Netflix will fight tooth and nail to increase its market share, investing $17 billion in original content production this year. The company is also exploring unique ideas like the choose-your-own-adventure format of Black Mirror: Bandersnatch and local-language productions from France, South Korea, and Norway. Netflix is always throwing a ton of spaghetti at the wall to see what sticks.
When the time is right -- probably many years down the road -- Netflix will abandon the digital-streaming business and launch something better. I can't wait to see how Netflix might surprise us next.
Again, that's what a winner does. That's why I will own Netflix stock until the cows come home.
