Whitney Tilson betting on Netflix and BuffettOctober 1, 2012: 2:30 PM ET
Speaking to investors at the Value Investing Congress in New York Monday, the well-known hedge fund manager said Netflix is due for an Amazon-style (AMZN) ride over the next decade. Investors seemed to agree (at least for now), sending shares of Netflix up 3% Monday.
Tilson said Netflix has shown minimal profits because it's largely reinvested in growth areas and in international expansion, much like Amazon did earlier in the 2000s. And Amazon's stock has soared since then.
Netflix also has 10 times the number of subscribers of its nearest competitor, Hulu, which carries a market valuation of about $2 billion, said Tilson. Comparatively, Netflix has a market cap just over $3 billion.
The worst-case scenario for Netflix's stock is the company getting snapped up by one of its rivals.
Tilson said Netflix could be a "bite-sized acquisition for a half dozen companies" and any offer would likely spark a bidding war for the company's nearly 30 million subscribers. He added that Netflix would likely then get taken out above its current share price around $55.
Of course, Tilson hasn't always been right.
His calls on Netflix have been particularly ill-timed. He took to Seeking Alpha in February 2011 to tell traders to short Netflix as its shares were soaring. That prompted Netflix CEO Reed Hastings to defend his company on the same blog and Netflix's stock continued to move higher for several more months.
In late 2011, Tilson changed his tune and called Netflix a buy, noting that its stock had already been battered too much. Apparently, sellers weren't through with Netflix and shares are down more than 20% this year.
When the company reported earnings in July, it warned the remainder of 2012 would be weak.
Tilson's other key pick, Berkshire Hathaway, was one he touted at last year's conference. Buffett's empire has had a good year, with Berkshire's Class A stock surging 19% since Tilson made his call last year.
Tilson is well known for making bold stock picks (if not always winnings ones). He admitted in the question and answer session that his fund is flat in 2012. Tilson also recently ended his partnership with Glenn Tongue and returned money to investors, after inking steep losses in that fund.
"After 12 years of feeling pretty smart, getting my butt kicked by the market over the last two years hasn't been fun," said Tilson.