Fortune has an interesting profile of Reed Hastings, CEO of Netflix, that provides some color on how Netflix has been able to generate such exceptional performance:
Reed Hastings isn’t supposed to be here — not on a list of the year’s top businesspeople, and certainly not on the cover of Fortune. His DVD-by-mail company, Netflix, was supposed to have flamed out by now, a one-trick pony that was destined to be crushed by Blockbuster or Wal-Mart or Apple or you name it. He and his little red envelopes were supposed to be long gone, with Hastings toiling at some new startup, or perhaps enjoying an early retirement in Santa Cruz, Calif., the laid-back seaside city he calls home.
Whoops. Not only has Hastings earned the No. 1 spot on Fortune’s Businessperson of the Year list, he and Netflix (NFLX) are also killing it: The company he founded in 1997 is the stock of the year, up more than 200% since January, vs. the S&P 500′s tepid 7% gain. Its shares have run laps around even Apple’s. Expanding at home, and now internationally, Hastings has built his company on a hard-driving and risk-taking culture that has made him a guru to a new generation of Silicon Valley entrepreneurs. And his reach extends far beyond the Valley. Hastings already upended the movie distribution business; now he’s changing the media game again by streaming movies and television shows over the Internet — at the expense of Netflix’s still-booming DVD business. Cable companies hate him. Hollywood studios aren’t sure whether to embrace him or fend him off. Virtually every movie deal today includes an online-distribution component. Declares film producer Harvey Weinstein: “It’s because of Netflix.”
My emphasis added below on what seems to be his key to success.
An obsession with failure inspires Hastings to try new things, like offering $1 million to anyone who can make Netflix’s movie recommendation algorithms better. It also drives him to do what so many CEOs are afraid to do: cannibalize their own businesses.
Source: StockCharts.com
The article also includes the following nugget:
In January 2005, Wedbush Securities stock analyst Michael Pachter called Netflix a “worthless piece of crap.” He put a price target of $3 on the stock, at the time trading around $11.
NFLX is currently trading at $168.
Disclosure: Dorsey Wright currently owns NFLX in our Aggressive portfolios and it is a holding in the PowerShares DWA Technical Leaders Index (PDP). A list of all trades over the previous 12 months is available upon request.
Posted by Andy Hyer 
