You don’t see charts like this very often, thank God:
Barron’s has an article today suggesting that NFLX might be worth into the $100s. That it might, but while the market hasn’t helped, it is management idiocy that brought the stock to this place so until management changes, I think there are better places for your more speculative money.
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In their excellent weekly commentary Bespoke Investment Group point out how what they call “retired” stocks have started to outperform. The two examples listed being Intel and Wal-Mart. On the other hand, recent darlings of the market have been flayed alive, Netflix being the prime example. From a July 13th high of $304.79 to a Friday close of $117.04. What is really interesting is TC2000′s volume at price analysis chart where we can see that a large bulk of the selling was at or near the lows. $125 and $110 seem to have been favored prices to sell at. I guess stops weren’t in vogue with the NFLX crowd but this chart is yelling out for some sensible money management or at least a service such as SmartStops:
I will be interested to see if this trend against recent heroes is done any time soon. Fince August 6th, the IBD50 list has only beaten “the market” (my average of the S&P500 and the NASDAQ composite) 36% of the time and not at all since September 3rd. That September 3rd date is certainly a point of interest, as the Stocktwits 50 hasn’t beaten the “market” since then either and only has a 27% win rate against the “market” since early August. Both market indices lead the compounded returns of the IBD and ST 50s by a decent margin, and the main lists have outperformed their top-10s. Poster children are clearly out of favour. My monthly IBD Top-10 tracking portfolio, which is up 7.23% since its January 24th inception, lost value last week, too.
It will be interesting to see when this worm turns. If and when it does, there may be some money to be made from the darlings.
I was interested to see how the IBD 50 project would work out after this turbulent week. I was expecting some position changes, but there was only one. Fossil Inc (FOSL) was replaced by Netflix (NFLX). This is another example of a stock rotating in and out of the portfolio over a two week period. Although I’ve tried some indicators that might prevent this apparently unnecessary turnover, I’ve eventually concluded it was too much work. Not because I’m lazy; I just want to keep things simple. Seeing that Acme Packet (APKT) is currently down 13.58% has made me wonder if a trailing stop might not be a good addition. In real life trading this portfolio it might be, but for the model I’m leaving it alone. Interestingly enough, APKT is a long-term member of the experiment, only dropping out for one week, causing us to re-purchase just about at its high.
I’m still working on a good index to benchmark the IBD50 project against. For now I’m using the S&P500 index. For the week the S&P was down 1.92%. Our portfolio dropped 3.84%. Well, I suppose volatility goes with the territory, as since inception the S&P index has actually lost 0.32% while the test IBD 50 portfolio is up 10.16%. I’ll take that performance for now.