Stocks keep heading higher, but anyone who's been in the market for more than just the past few weeks knows that the market doesn't move upward forever. Sooner or later the downticks will come, and corrections sometimes cascade into outright crashes.
Where should your money be when the going gets tough? My largest investment is Netflix (NFLX +0.41%). It's held up well in previous market setbacks, and I think the leading premium streaming service has what it takes to weather the storm the next time the market crashes.
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Streaming along
Netflix probably isn't on your short list of all-weather stocks, and that's fair. To hold up in good times and bad times, you want shares of companies like discount department stores, auto-parts retailers, and essential utilities. However, in a way, Netflix is a little bit of all of those things.
It's a mass-market discounter in entertainment, offering quality video entertainment at a fraction of cable and satellite television plans. Netflix won't provide you with wiper blades or motor oil, but its healthy flow of trending content will keep your engine running in social situations. And after the past year and change of sheltering in place...good luck convincing folks that streaming video isn't an essential utility.
Even if you don't buy Netflix as the answer to every question, the math bears out its resiliency. Netflix was one of the handful of stocks to move higher in 2008, climbing 12% that year. Keep in mind that this was during the subprime lending crisis, a global financial calamity that resulted in the S&P 500 cratering 38% the same year.
Netflix has staying power because no one can spend as much on content as it can, given its global audience of more than 200 million paying subscribers. Netflix also has pricing power. It has increased its monthly rates five times since 2014 -- a total 75% increase over that period -- and its audience is always larger by the time the next hike rolls around.
Consistency is what weathers a crash. Netflix shines on that front: It has rattled off 18 consecutive years of double-digit revenue growth.
Netflix is mortal, of course. It has fallen short of its own guidance, usually about once a year. The stock itself has slipped when new streaming services launch -- even if its stellar long-term track record shows that there's room for more than one ruler in this niche. Remember the Qwikster fiasco? The big takeaway in sizing up the company's miscues and stock-price drops is that it always finds a way to bounce back.
The best thing about Netflix is that it might just be scratching the surface. Netflix is still not allowing advertising on its popular streaming platform, a market that one analyst estimates to be a $14 billion opportunity. And it's just dipping its feet into the infinity pool of merchandising.
As Netflix transforms itself into a broader media stock than just the basic cable of streaming services, it may become vulnerable. Maybe it won't be as resilient. However, right now all of those possibilities look like chances to build incremental revenue. If you're still worried about a market crash coming sooner rather than later, you can do a lot worse than warming up to Netflix.
