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Which asset grows the most during the crisis?

April 28, 2020

The corona virus is said to be more than just a pandemic. Of course it’s a public health issue. However, this is already a major economic crisis. Everyone stays at home. Business closed. And practically paralyzed half a planet. Of course, they are necessary measures to prevent the virus from spreading. But, Economically, the remedy can be worse than the disease, as more people die from poverty each year than from any other virus. Almost all of the assets collapsed during this crisis. Bitcoin, which many cryptanalysts consider to be a lifeline, also slumped. However, Netflix was a light in so much darkness. The company’s stock shines like the sun. Analysts predict their debacle in October 2019. It turned out to be the jewel in the crown. Netflix against Bitcoin. Let’s talk about the crisis. Who do we give the medal to?

We have all heard stories of arrogant giants who underestimate little dwarfs with great potential. Yahoo has underestimated the founders of Google. Well, and we all know the outcome of this story. Google is now a Titan and Yahoo is a small company. This is the classic story of the underestimated hero. It is the drama of the village fool, who was actually a genius and, after years of misunderstanding, buys the village. We love these stories because we were all there. We were all underestimated at some point. And it feels great to show them that they were wrong with us. We are winners and we show it. We were successful against all signs. Netflix is ​​one of those stories that reminds us of how little David can defeat Goliath.

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Which asset grows the most during the crisis?Which asset grows the most during the crisis?

We are in the late 90s and the dotcom boom begins. The blockbuster retail chain has a virtual monopoly for the rental of films. Back when we were talking about something that came out of the flint, people went to a blockbuster to rent movies. It was a very similar concept to borrowing books from a library. People took a few films, paid for them, and had to return them within a few days. In my college days, like a thousand years ago, I was a frequent Blockbuster customer. There was one a few meters from my apartment. And there was no weekend when he didn’t visit her. The problem was that I sometimes forgot to return the videos on time. So he had to pay fines. At about the same time, Netflix appeared. I remember perfectly. And it sounded crazy at the time. It was too good to be true.

The first tier Netflix wasn’t the Netflix of today. Netflix started out as a kind of blockbuster in the mail, but no penalties for late returns. It was incredible for the customer, but it intrigued the business as such. Was such madness profitable? Well, at the time, I assumed it should be. The perfect formula had certainly been found, but as a young and naive university student I couldn’t see it. However, I later found that Netflix was not profitable at the time. His business model was crazy. You managed to build a customer base but wasted money. In 2000 it had 300,000 subscribers. Blockbuster had the option to purchase Netflix for just $ 50 million. Of course, the transaction never took place.

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Where’s blockbuster today? And where’s Netflix? The founders of Netflix were inspired by Amazon. In a way, they want to make the video rental business what Amazon did with books. Infinite catalogs, no shop, mail delivery, excellent prices, good service. The online streaming service came later because the speed of the Internet did not allow this at the moment. But there was the vision. The advent of YouTube was the boost they needed. The service was not great in terms of quality, but the users were intrigued. Videos on the computer! Of course I do. Despite initial technical limitations, Netflix Online became a sensation. Netflix developed and became a giant.

The stock has grown steadily since going public in 2002. It started at $ 15. And has already exceeded $ 400. Y is the N in FAANG. If you don’t know FAANG, it’s because you’ve surely lived in a cave for ten years. FAANG is an abbreviation for the trade name of the five major technology companies of today. FAANG: Facebook, Apple, Amazon, Netflix and Google. Netflix is ​​the younger sister. With a market cap of $ 185 billion (bigger than Bitcoin).

Before the crisis, shareholders were concerned about Netflix. The action faded. In fact, we now know that it was oversold due to increasing competition. Netflix is ​​no longer alone. Amazon, Disney and Apple have launched their own services and are the famous “Netflix killers”. However, this crisis has served as a very revealing litmus test and It allowed us to take a closer look at Netflix. Investors value the stock more than it actually rose, while everything else falls.

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Netflix has more than 60 million subscribers in the United States, a country with 128 million households. There are over 190 streaming service providers, but Netflix has an 87% market share. It has virtually no competition anywhere in the world and this figure can be higher. The entertainment industry was hit hard during the crisis. But Netflix has 16 million new subscribers. The studios don’t have much to give now as almost all of the production has been quarantined. However, Netflix has content for a while. They produce all of their content early. This means that the Covid-19 did not prevent her from being released.

Despite the challenges of Internet speed in some countries and legal restrictions in some places, Netflix’s position in the world is stronger than ever today. You are not yet in China due to a government restriction problem, but are working on it through special agreements with a local partner. Netflix is ​​getting stronger during the crisis. And his action is definitely gaining strength. It won’t be easy to just get her off her throne like that.

Now Netflix and Bitcoin. Obviously, they are very different things. They are incomparable in many ways. It makes no sense to say that one investment is better than another because we would get into a wrong dilemma. The purpose of this comparison is to show that it is also valid to look beyond the crypto mansion. Bitcoin all or nothing is an extremely radical attitude. Analyzes promised us that Bitcoin would go to the moon during the coronavirus crisis and speak about it with unwavering faith. However, they are colossally wrong. Suddenly it is not wrong to stop thinking about the absolute and to build a more diversified portfolio. Bitcoin yes. But other things too. Netflix shares maybe?

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