Netflix has been one of the real battleground stocks over the last year. Momentum buyers love the stock. The shorts think it is way overvalued. Whitney Tilson even had to throw in the towel on his well-publicized short of NFLX. NFLX has confounded so many people it was referred to recently as a Widowmaker!
Why is NFLX such a widowmaker for the shorts? Probably because it has performed very well when the market is down! If you are shorting any stock you should be relieved to look over at the quote screen and see a sea of red. But over the past year, that’s not exactly what you get with NFLX. Below is a chart of NFLX’s performance over the last 12 months when the S&P 500 is down for the day. NFLX is up substantially over the past year when the S&P is down. That has to be a killer if you’re short. Hence, The Widowmaker.
Now look at the performance of NFLX over the past year when the S&P has an up day. It hasn’t exactly shot the lights out for the longs on up days!
I suppose when you are looking for a good solid defensive name that will hold up in a down market you should put NFLX at the top of the list! It does look like that relationship is changing over the last couple of months. But no matter how you cut it, NFLX continues to confound everyone! Same old story with this stock today. The market is selling off hard on the anemic jobs number, but NFLX was up in the morning.
Disclosure: Dorsey Wright Money Management has positions in NFLX. Past performance is no guarantee of future results. A list of all holdings for this portfolio over the past 12 months is available upon request.
