$NFLX Was a $400M Lesson in Short-Term Thinking
“If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes.”
Warren Buffett
He realised that the industry operates on a 90-day cycle, with investors obsessing over quarterly earnings reports and Wall Street analyst upgrades.
However, a person who wishes to be a successful long-term investor to beat the index must have a multi-year mindset.
Short-term thinking to terrible decisions.
In April of 2022, Bill Ackman famously panicked and sold $Netflix(NFLX)$ for a huge $400M loss.
This was after the company lost just 200K subscribers in Q1 2022. This was simply panic selling, and an investor of Ackman’s caliber and experience should have known that. He was too focused on short-term thinking. It was clear that the subscriber loss was driven by the end of COVID lockdowns. There was a lot of pull-forward demand, so people were cancelling the subscriptions to focus on outdoor activities.
This was not the start of a long-term trend, and we all know what happened after that. Growth returned to Netflix, and the stock jumped 600% in 2 years, with Ackman literally timing the bottom.
When a stock drops 20% in a few months, the short-term investor sells everything to stop the bleeding. The long-term investor ignores the drop because they understand the business and have done the math.
Don’t obsess over quarterly earnings reports or short-term market swings, instead, evaluate companies by long-term trends.
Consider what a business will look like in 5 or 10 years.
Even if a stock dips for a few months, don’t abandon it if fundamentals stay strong.
When markets keep you watching, knowing when to switch off matters too.
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