The Peter Lynch Investor » Newsletter » Imagine buying Netflix in 2004

Imagine buying Netflix in 2004

Darcy Paterson

May 1, 2023  
Advice, Compounding, Education

I don’t have to because I did.

It’s true. I bought Netflix in 2004. However, this isn’t my “rags to riches” story. Why? Because I sold it in 2005.

If you’re disappointed and want to stop reading I can’t blame you. It’s a terrible way to start a story. However, if you do keep reading I promise you’ll learn a valuable lesson about investing.

There’s an investing term used to describe my terrible Netflix story. The term is “opportunity cost.” You hear investors talk about it a lot. Especially the ones who’ve been doing it for awhile. For example, Warren Buffett has a few examples of missing out on opportunities. Here’s one that discusses his missed opportunity in Disney.

Although my story ends the same as Buffett’s it’s unique to me. I wasn’t a rich and savvy investor like Buffett. I was just a guy starting my investing journey. A noob. It was a long time ago so I don’t remember exactly but Netflix was probably not-even my tenth investment?? It was just a few hundred dollars. A huge sum to me at the time.

I bought the stock after reading an article about it in Wired magazine. I still remember the excited feeling I had. In my mind I thought, “this is it!”

In 2004, most people still rented movies from the local video store. Netflix was awesome because they did away with the dreaded late fee.

Local video stores used to charge you $5.00 if your video was returned late. For procrastinators like me the fees piled up quick. When Netflix came along and said keep the videos for as long as you want I said to myself, “I’m never renting a video from Blockbuster ever again.” I wasn’t alone.

So even with all this conviction why did I sell my shares in Netflix?

In 2005 the stock price started to fluctuate. I got nervous. This nervousness compounded when I read a story about how an investment firm sold its entire position in Netflix. They cited some incomprehensible business jargon as their reason. I thought, “well they know more than me. I can’t even understand what they’re saying but it sounds scary. I better sell too.”

Can you imagine? I knew in my heart that Netflix was going to be big. Fewer and fewer people were renting from Blockbuster. Yet, I believed these pros knew something I didn’t and that something was terrifying. I didn’t trust myself.

Now, whenever I feel self-doubt I remind myself of its cost by visiting this website. It’s a little masochistic but it’s a good reminder that even amateurs like me can make good investment decisions… we just need to believe in ourselves.