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ValueCapital

What do you think?

Whew! Surely is a lot to digest for this old redneck!

I updated my original NetFlix's upper bound vs. lower bound with probability analysis below:

I usually only have one criteria: "Does it offer a margin of safety today?". But, like I said, I'm just a simple redneck so I'd just get all tangled up if I tried probability analysis and integration and stuff like that. Heck, I get confused goin' for the mail sometimes! <GGGGG>

To expand on my standard, I look at the cashflow compared to the price and ask myself the question: "If they did next year what they did the last 4 quarters, would I be a happy owner buying in at this price?"

I like keeping it simple enough for me, and no doubt, as bright as you sound, what you do is simple enough for you to do.

Lower Bound = Liquidation Value = Net Net Asset Value = $85 million (vs. $667 million current market valuation)
%-probability it can go down to only $85 mill valuation is approx. only 10% (this is the figure I am comfortable with. It is unlikely NetFlix will go down to $85 mill market valuation level -- this is below NFLX latest book value of $144.82 million).


I used to buy based on liquidation value and sometimes still do. Figuring out liquidation value isn't of much use though if you don't believe the number or don't believe you'll use it.

After all he owns 4,060,618 shares - NetFlix's largest individual shareholder.

While I guess that's important to some, I don't know how much extra confidence that really gives me. Let's face it, he didn't buy those shares on the open market paying full retail for them. He likely got the lion's share through the IPO and then through options and stock grants. The theory is that if the CEO owns a lot of shares that somehow he'll be able to have performance abilities he doesn't possess without that ownership. A person of character will perform well in either case and I only want to own companies run by people of character.

I still think NFLX now provides good risk/reward ratio for long-term investor at the current price of <$13.

Well, that's important. An investor should have enough confidence in their analysis to be comfortable when they have their money invested.

It seems like it has good, but not great, numbers to me.

Good Luck with it!

PosFCF
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