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Forget Netflix - Buy These 2 Out-Of-Home Recovery Stocks Instead

May 04, 2021 8:25 AM ETCBL, EPR, EPR.PR.C, EPR.PR.E, EPR.PR.G, MAC, NFLX, PRET, PRETL, PRETM, PEI.PD, WPGGQ, WPGIQ17 Comments

Summary

  • Netflix has been one of the best-performing investments of the past decade, and its growth only accelerated in 2020.
  • Many investors were quick to extrapolate this recent growth far into the future, but we think it is a mistake.
  • As we put the crisis behind us, Netflix will face great challenges that aren't yet fully reflected in its share price. We recommend buying out-of-home entertainment stocks instead.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Learn More »

Netflix - Buffering Screen
Photo by sd619/iStock Editorial via Getty Images

Netflix (NFLX) has been one of the best-performing stocks over the past 5 years, earning nearly 4x the returns of the S&P500 (SPY):

This outperformance was the result of rapid

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This article was written by

Jussi Askola, CFA profile picture
62.43K Followers

Jussi Askola is the President of Leonberg Capital, a value-oriented investment boutique that consults hedge funds, family offices, and private equity firms on REIT investing. He has authored award-winning academic papers on REIT investing, has passed all three CFA exams, and has built relationships with many top REIT executives.

He is the leader of the investing group High Yield Landlord, where he shares his real-money REIT portfolio and transactions in real-time. Features of the group include: three portfolios (core, retirement, international), buy/sell alerts, and a chat room with direct access to Jussi and his team of analysts to ask questions. Learn more.

Analyst’s Disclosure: I am/we are long EPR; MAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

K
CBL is going to buyout MAC
S
any chance MAC is an M&A target?
Jussi Askola, CFA profile picture
@Stewo234 It wouldn't surprise if it was bought out by a major PE firm.
Bonjwa profile picture
Have a full position in MAC. I think there is 100+% upside from here within the next couple of years.
Jussi Askola, CFA profile picture
@Bonjwa Thank you for sharing your thoughts!
nerd_rage profile picture
Covid just accellerated existing trends. NFLX doesn't depend on people getting locked in their houses. It's been benefitting from the implosion of cable, broadcast and non-franchise-blockbuster theatrical movies.

Malls were in secular decline before covid so why should that magically turn around? People are getting used to Amazon deliveries with free shipping.

Movie theaters won't die but they were consolidating, with smaller theaters closing, before covid. The big ones that can offer sensory-overload type experiences you can't recreate at home will do just fine, but there doesn't need to be a lot of theaters like that.
Jussi Askola, CFA profile picture
@nerd_rage That is not correct. Class A malls such as those owned by MAC grow sales per square foot every year till the pandemic. No secular decline there.

I am not saying that NFLX will die. I am saying that its growth will suffer from the end of the pandemic.
j
Thanks for the MAC update.
C
Hasn't MAC been in decline since 2016? No, covid didn't help, but it also hasn't recovered. It's just been in a long steady decline.
Jussi Askola, CFA profile picture
@CaptainFish The market sentiment for retail turned south in 2016. It was also probably overpriced back then. Nonetheless, its sales per square foot kept on rising from 2016-2019.

We think that the real value is somewhere in between where it was back in 2016 and where it is today.
nerd_rage profile picture
@Jussi Askola Are people going to malls? Teenagers don't hang out in malls. Grownups get deliveries from Amazon. There doesn't seem to be a lot of demand for the mall experience anymore.
Jussi Askola, CFA profile picture
@nerd_rage Class A malls hit new record high sales and rents in 2020 right before the pandemic.
cdgingrich profile picture
Jussi, thanks. I have been looking at MAC. But most of the comment boards are loaded with shareholders who think MAC management is terrible. Your thoughts?
Jussi Askola, CFA profile picture
@cdgingrich I think that there are better-managed REITs out there. SPG has the best management in the mall space. But I am comfortable with MAC's management. They have made big mistakes in the past, but hopefully, they have now learned from them, and we are getting a big discount for it. I would add that the insiders bought a lot of shares during the pandemic. That's encouraging.
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