I've been a shareholder of Netflix (NFLX 2.32%) for a long time -- a really long time, you're about to find out. It's my largest stock holding, and you'll soon learn why that's a bittersweet distinction for me.
With Thanksgiving approaching this week, I figured I would show some gratitude to the stocks that made me the investor that I am today. I am thankful to own a piece of Netflix. Let's go over some of the reasons why I feel that way about the streaming services stocks pioneer.
Image source: Getty Images.
1. The humbling has made me smarter
I've been a Netflix shareholder for more than 23 years now. This is actually a bittersweet story. I was fortunate enough to buy Netflix in October 2002, when it was a broken IPO. I wrote about it a week later, and if you had followed my recommendation at the time -- and held -- you would have a 100,000 bagger, too.
Unfortunately, nailing the buying decision is just part of investing process. I sold 80% of my stake a few months later. Over the following 10 years, I sold all but 1% of my original position. Owning 1% of a stock that would go on to create generational wealth has its advantages. For starters, it's easy to figure out how much my position would be worth had I never sold. All I have to do is move the decimal two spaces to the right to realize I made a $7.5 million mistake.
Another silver lining to not owning 99% of my original Netflix stock is that it provides a costly but humbling lesson on the patience required to see a multibagger play out. I learn more from my mistakes than from when I get a call right. I learn more from the ones that got away than the ones that stayed.
The third good thing about owning just 1% of my initial Netflix position is, well -- who am I kidding -- that's it.
NASDAQ: NFLX
Key Data Points
2. Winning companies burn their boats, not their moats
Netflix serves more than 300 million streaming paid memberships worldwide. It's a far cry from 2002 when I was one of roughly 700,000 subscribers receiving DVDs by mail from Netflix.
Times change, and Netflix adapts. The service would eventually embrace Blu-ray discs, at a premium naturally. However, the seismic shift here was when it became one of the first premium streaming video services. It initially included access to its growing digital catalog at no cost for disc recipients. When it made the big move to split the offerings into two different businesses, most people initially felt that it was a poor business decision. Qwikster is still a punchline, but it's Netflix that got the last laugh.
Like Hernando Cortes and other military commanders who have burned their ships to make moving forward with an attack the only option, Netflix has been willing to be its own disruptor for the sake of padding its lead and advantage. Netflix historically resisted the money that could be made by embracing advertising as an incremental revenue stream, initially on its disc mailers and then through its streaming service.
It wasn't until three years ago -- two decades into its publicly traded tenure -- that Netflix introduced an ad-supported offering. Unlike the short-lived trial of slapping marketing missives on its DVD mailers, this wasn't driven by the desire to milk more money out of each customer. Rolling out a cheaper ad-supported tier became a way for Netflix to retain cost-conscious subscribers in a world of cheaper platforms out of hungry media stocks.
3. Trust is built over time
Some people still think that Qwikster was a mistake, even though it quietly killed its DVDs-by-mail business two years ago. Today, critics and even many shareholders believe that it's a mistake for Netflix to get into the competitive market of bidding for live sporting events. You might even feel that it was a mistake for Netflix to stop reporting quarterly subscriber numbers at the end of last year.
I'm still not sure how I feel about some of the recent changes, but my trust in Netflix has become stronger than any doubts I may have along the way. As for live sports, despite the lack of replay appeal that has been at the heart of the platform's content, no streaming service has a larger paying audience. It can leverage the size of its audience by affording to outbid the competition.
I've even come to accept that I didn't need Netflix's subscriber count. I'll cling to the 301.6 million global streaming paid memberships it had at the end of 2024, and trust the visibility that Netflix does provide. If someone was concerned that Netflix was done talking about user count or churn rate because the business was heading into turbulence, check the results. The 17.2% year-over-year revenue growth it posted in its latest quarter is its strongest top-line jump in more than four years.
I don't need to have crystal-clear clarity if that growth is coming from a precise increase in subscribers or if it's just hitting it by generating more subscription and/or ad revenue per member. I'm not a competitor that would use those data points to make my own rival product stronger. Until it proves otherwise, Netflix has earned my trust -- and that's one more thing that I'm grateful for this holiday week.
