Why Whitney Tilson is Short Netflix
MarketFolly.com talks up why Whitney Tilson is still short NetFlix Inc. (NASDAQ:NFLX), in fact, its now one of T2 Partners largest short positions.
(http://www.marketfolly.com) Whitney Tilson has gotten his ass handed to him in his short of Netflix (NFLX). And, he'll be the first to tell you that. However, that hasn't rattled his conviction as he thinks the company is now trading at ridiculous valuations. In support of his argument, he's recently released an in-depth bear case for NFLX entitled, you guessed it: "Why We're Short Netflix."
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We've covered T2 Partners' portfolio in-depth before and Netflix is now one of their main short positions. NFLX is the definition of a momentum stock. It has made the longs copious amounts of money and ripped the collective faces off of short sellers. Given the beating Tilson and his hedge fund T2 Partners have taken, why persist? He writes,
"We acknowledge that the company offers a useful, attractively-priced service to customers, is growing like wildfire, is very well managed, and has a strong balance sheet. So why on earth would we be betting against this stock? In short, because we think the valuation is extreme and that the rapid shift of its customers to streaming content (vs. mailing DVDs to customers) isn’t the beginning of an exciting, highly-profitable new world for Netflix, but rather the beginning of the end of its incredible run. In particular, we think margins will be severely compressed and growth will slow over the next year."