Today I’m going to continued the mid-year analysis of our portfolio holdings. Yes, it was an analysis of Mastercard and United Healthcare Group, what their business do and the gain they’ve brought to the group these far. This email will analyze two more of our holdings.
The Flat Achievers
The company’s commerce ecosystem includes point-of-sale software and hardware that offers sellers to payment and point-of-sale solutions. It provides hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards. In a nutshell Square is a manufacturer as well a a technology company for merchants and function as their payment and transaction accounting mechanism. Some concerns about Square is that founder and CEO Jack Dorsey who to my knowledge is still splitting his time between both Twitter and Square. And though Square continues gain market share and traction I wonder if movements couldn’t be more accelerated if it had its own primary Chief executive.
There’s also Square Capital, since Square Capital’s inception 5 years ago, it’s been able to loan nearly $4.5 billion dollars. The average loan is about $6,500, while the smallest is around $500. This product offering put it right in the range for small mom and pop business who can’t afford the crushing terms that come with bank financing or loans. And as entrepreneurial sentiments continues to take hold of the millennial generation I believe this part of the business continue to grow.
Since acquiring our shares back in mid-March the security is basically flat. It is no worse nor any better than where we started and he is why I think we should stay with the brand, Square CashApp service are a rockstar. Research has shown that Cash App was more popular among users with less than $50,000 in annual income while PayPal Holdings Inc.’s Venmo card was used more frequently by higher-income customers. With this service Square has quietly make itself a formidable FinTech player with influence to shape the market. And as it’s Cash App usages grow the stock can easily become a $100 stock 35% higher from its current price. My recommendation is to hold Square long term.
The company operates in three segments: Domestic streaming, International streaming, and Domestic DVD. It offers TV series, documentaries, and feature films across various genres and languages. The company provides members the ability to receive streaming content through a host of Internet-connected screens, including TVs, digital video players, television set-top boxes, and mobile devices. It also provides DVDs-by-mail membership services. The company has approximately 139 million paid members in 190 countries. Over the last three months of our holding the shares Netflix have risen roughly 4% a drop in the bucket for tech giant that over the four years has risen 800% since the stock split in 2015. But this ain’t the same old Netflix that was launched in 1997.
The once uniqueness of Netflix streaming business has been replicated by Hulu, Roku, and media giants like Disney and Time Warner. Almost every major American media company is in streaming in some form or partnership. And these venture are cutting into what was once the proprietary nature of Netflix’s business. Disney’s venture will eventually remove all of its content from Netflix, which as you can imagine will leave a huge void of material. With that in mind over the last several years Netflix has been spending billions to generate original content that will free them form the burden of licensing fees and deals.
Netflix’s domestic growth has also severely slowed as well. Whether that’s a result of competitors entering the sectors or they have tapped out on all their potential customers domestically, perhaps a combination of both is the answer. But their international expansion is just getting started. The previous two quarter they’ve seen massive customer growth in Europe and parts of Asia, which signal this could be where the next generation of growth will stem from.
Overall if I had to give Netflix a rating it wouldn’t be a Buy more nor a Sell the position but a Hold & See. The security hasn’t fallen off the cliff so it’s not need to make a rush decision and it isn’t weighing down the portfolio at this point. Earning season will launch again and July and it will show how the next six months of Netflix will be like.
The final three part analysis tomorrow……
Jamaal W Vetose
Todd Capital Investments