A big lesson everyone should learn from

A big lesson that I have leant in the past decade of my investing/trading life is to go against the herd and main stream headlines, so-called being contrarian. Most often than not, when everyone is betting on something, the turning point is not far away and you can bet with some confidence to go against the trend.  Here is the latest example about Netflix (NFLX). I didn’t specifically talk about it but I think it is a good example to share as a hindsight.

Recently The Wall Street Journal ran an article called “Netflix’s Picture Getting Darker.” Understandably, Amazon has been a great challenge to NFLX for some time. Here is the conclusion from the article:  “Netflix now faces slower growth and more competition. And in an environment of rising prices prompting higher-than-expected churn [subscriber turnover], the stock’s rich valuation of over 100 times projected earnings looks particularly unappealing. Don’t binge on this stock.”

 NFLX has been under tremendous pressure for months with a lot of doubts and bearish views on it. The WS article was certainly adding further blow to it. Most people in the market are good at doing one but bad thing, following the herd to buy or sell and in this case, the article had for sure caused an intensive dumping of the stocks. Now comes to the key point of the lesson I have learnt: The headline news in the major media often leads to the exact point of extreme and the last exhaustive move is often providing the best entry point to go to the opposite direction.  This was what I did. Tuesday, NFLX gapped up 19% after reporting much-better-than-expected third quarter earnings and subscriber growth. My contrarian theory wins again. See the status of my current positions of NFLX. But be aware, at $130 as of now close to all time high, it is very overbought and likely will come back down in the near future. Again, don't follow the herd to buy at this moment.