Stock Notes for 1/23/21

ARK Invest (ARKK)

According to Eric Balchunas of Bloomberg, ARK Invest family of ETFs passed both BlackRock and State Street in YTD cash inflows. This is remarkable given that ARK Invest is a relatively tiny investment firm when compared to the Goliaths like BlackRock, State Street, Invesco, etc.

Bitcoin (GBTC)

Speaking of Black Rock, the largest investment firm has approved Bitcoin futures for two of its funds.

This is a significant development because the heavyweight investment firm is validating Bitcoin as a digital asset. A move into Bitcoin means that the investment firm has done its due diligence and allowing its investment managers to purchase Bitcoin. Lastly, Black Rock is also adding its name to the list of influential financial institutions who will push Bitcoin into the mainstream.

Netflix (NFLX)

Netflix’s Q4 2020 earnings announcement was this week. What an amazing quarter for Netflix:

  • 8.5 million paid net additions, crossing the 200 million paid memberships
  • 37 million paid memberships added in 2020
  • $25 billion in annual revenue, 24% YoY growth
  • Grew operating profit 76% to $4.6 billion
  • Anticipates free cash flow to break even in 2021, Netflix believes it no longer have a need to raise external financing for our day-to-day operations
  • Maintain $10B-15B in gross debt and will explore returning cash to shareholders through ongoing stock buybacks, as we did in the past (2007-2011).

While I no longer own NFLX, I do enjoy watching the earnings call because Reed Hastings is an awesome CEO. While 2020 had meaning pull forward in terms of new memberships because of the pandemic, the company still believes there’s growth in 2021.

I exited this position when it became clear my cable cutting thesis was met. I was also not comfortable with the amount of debt the business required to create original content. But I am glad to see the business is projected to reach free cash flow in 2021 so that it can start to pay down its debt.