Three years ago, in 2012 I wrote how I was going to sextuple my Netflix investment by 2016. To my surprise, it became an eight bagger in less than two years. So, I sold half my shares, paid off our two family cars, and paid cash for the birth of my second son. (Tip: If you pay cash for health care in America you usually can get a discount between 30%-50%! Great for those of us with High Deductible Health Plans who never hit the deductible). This is why everyone should own at least a dozen individual stocks to go with their index funds in their 401k, it literally can change lives.
*Begin Rant* I vow to never have car payments in our family again, and this promise is a major factor for my wife being able to stay home with our kids. Netflix directly changed my kids’ lives (they are also addicted to it, but that’s a problem I won’t go in to). The average American is broke, has no savings, even while living on two incomes per family. Cars are ridiculously expensive and are a major factor as to why we are slaves to our jobs. Add up your family’s monthly car payments, multiply by twelve. That’s what you are spending per year (not even including gas, taxes, maintenance, etc.). Now, multiply that amount by eight as if you had invested that money in a stock like Netflix back in 2012. That’s some serious money, and that’s just one year’s worth of investment capital! I have learned (and have to constantly remind myself) that money isn’t the fruit, it’s the seed. Once you look at your paycheck as seeds instead of fruit, monthly expenses start to look incredibly expensive. *End Rant*
Fast forward to 2015, and Netflix is now up 12 times since 2012! This is why I always remind myself to avoid arrogance, and remember that calling stock tops and bottoms is impossible. Always plan to be wrong. Make being wrong part of your investing formula. This is why you should never sell an entire position, only trim it. Think of your stocks as trees that get overgrown, and every few years, you should trim them back a bit. You don’t need a perfect lawn, let them get overgrown a bit. The less attention you pay to your portfolio, the better. Though I follow stock news daily, I only look at my portfolio a few times a year. It’s amazing what can happen when you buy a stock, forget about it, and visit it three years later. Now, Netflix is the only stock in my portfolio with dozens of other holdings that has become a twelve bagger. Why Netflix?
Companies defining the future that are hated at the present will be your best investments.
It’s really just another variation of my favorite Warren Buffett quote with a focus on “growth stocks.” Now, Netflix has two other major advantages that makes it extra special: One, every person on earth is a potential customer. Two, monthly subscriptions are the best business models in the world. Netflix doesn’t just launch an incredible product that everyone wants. Netflix launches an incredible product that everyone buys every month. How many of your investments can you say have that quality? For me, it’s only the food, beverage, and energy companies that have these qualities. These companies are usually valued in the tens of billions of dollars and are much harder to quickly grow simply because of their size. I typically use food/energy companies as my dividend paying investments. Dividends make up half of investing returns in the market so you definitely want half of your portfolio in great dividend payers. Netflix was only 3 billion dollars back in 2012, and you have to be small if you are going to increase 12 fold. Babies grow to be adults but adults don’t grow to become senior citizens. You get paid for every inch your children grow.
Though 3D Printing is not the next Netflix, as the market is much smaller, 3D Printing is the future and is currently hated with extreme passion. That’s enough to get me pounding the table. If you aren’t familiar with 3D printing, spend 10 minutes on Stratasys.com and 3DSystems.com and tell me that isn’t the future. The Coke and Pepsi of the 3D Printing world, Stratasys (SSYS) and 3D Systems (DDD) are down almost 75% from their 52 week highs. Past performance can absolutely predict future results, and I am betting that these two 3D titans will eventually hit their 52 week high again. Netflix dropped and recovered, and I think these will too. When that happens, four bagger! Is 3D Printing over? Of course not, it’s just getting started! The reason why 3D printing is so hated is because sales aren’t growing as fast as people would like and there is ever increasing competition. If these investments don’t work, it will most likely be because the competition kills them. What if Google, Apple, Amazon, Microsoft, or HP start making 3D printers? Or, what if another startup dominates? That’s always a possibility that could make these shares losers. This is why you should always own at least a dozen stocks, place many small bets, and just try to be right once. If these two investments are losers, so what? With a portfolio of losers and moderate winners, you only need one 12 bagger to beat the market for years. Plant a lot of seeds ($400 a seed, the cost of one SUV car payment, is all that is needed!), watch them grow/die over the years, and only trim every few years.
Monty
| Stat | DDD | SSYS |
| Price (Market Cap) | 2.46 Billion | 1.90 Billion |
| Cash And Equivalents | 284 Million (179 million in 2011) | 442 Million (It was only 20 million in 2011!) |
| Long Term Debt | 0 (Was 131 million in 2011!) | 0 |
| FPE | 25.05 | 19.93 |
| PEG | 2.06 | -11.84 |
| Dividend And Yield |
N/A | N/A |
| Price/Cash Flow |
44.30 | -9.40 |
| Price/Book | 1.96 | .82 |
| ROE | N/A | N/A |
| Motley Fool Caps Rating |
4 stars | 4 stars |
| Size of Position In Portfolio | Increased from 2.5% to 5% | Increased from 2.5% to 5% |
Greedy When Fearful 