The Proficient Investor

Los Gatos based Netflix (NFLX) announced today a deal between cable channel Showtime and itself that will air the pilot episode of “Californication” starring David Duchovny (X-Files) and Natascha McElhone that centers around Hank Moody, a substance abusing writer trying to rekindle his career in Hollywood while dealing with his pre-teen daughter and ex-girlfriend who is now engaged to be married to another man.

Netflix will showcase the pilot using the “Watch it Now” feature as well as making it available for rental through the online DVD service. This marks a first in offering content well before it airs on cable.

The pilot began showing on Netflix’s online service July 24 and will run until it debuts on Showtime on August 13th.

Shares of Netflix (NFLX) closed at $17.39 gaining $.29 or 1.70% on the day. Rival rental service Blockbuster (BBI) gained $.24 or 5.63% to close at $4.50.

Netflix(NFLX) today announced they are lowering the price on their two most popular rental programs on Monday.  The first program which allows 3 DVDs and 18 hours of viewing time for their “watch it now” feature will be reduced from $17.99 a month to $16.99.  The plan that allows 1 DVD and 9 hours “watch it now” movies will be cut to $8.99 from $9.99.

Analysts are going to be coming out of the woodwork on this one.  Every analyst out there thinks they know the answers and know what Netflix is going to say when they report earnings today. I think they are going to be dead wrong.  In the short term, yes Netflix has seen some adverse reaction to Blockbuster’s “Total Access” campaign, but I still believe it is goint to be short lived.  Look at Blockbuster’s stock.  It hasn’t broken the $5.00 mark since April and has been on a downward slide ever since. On March 12, 2007 BBI was at a 52 week high of $7.30 while today in intraday trading is at $4.21.

Netflix is still the premiere brand here.  They still command a greater online presence than Blockbuster and I think the price cuts are going to help.  Analysts will point to revenue suffering as a result of the cuts, but I think it’s going to be beneficial in the long run as they gain subscribers and people upgrade from the lower plans to the higher ones.  “Watch It Now” is also going to get better as they bring more of their library online, something Blockbuster doesn’t even have in the works.   Netflix will continue innovating in the field of online movie delivery and I wouldn’t be surprised to see Hollywood studios lining up to release first run films soon simultaneously with theatrical releases using something like what Netflix has now.

I don’t think we see a turn around in Blockbuster until December when current CEO John Antioco steps down and hands the reigns over.  Until then, bide your time and use this opportunity to pick up more NFLX on the cheap.

As we head into the summer months and reports are coming in for Q2, investors are finding slumps in the overall market. Stocks aren’t performing at the same levels they have been over the past few months. This is fairly normal for the time of year mainly because a lot of traders go on vacation and in general people aren’t as focused on investing during the summer months.

There are pockets of positive territory, however it just takes a little tenacity to find them. Defense is still a good sector to be watching and I have mentioned Lockheed-Martin on this blog before. I also like Northrup Grumman.

In Tech you should be betting on Google and Apple. On Aron Tasks’s The Real Story podcast one of his guests mentioned he believes over the next couple years Apple goes to $200. That seems like a very bullish outlook, but remember when Google was at $100 and everyone thought it was ridiculous to think they could go to $200 let alone $500? I liked Apple at $90…and I like it even here at $132. Buy one share or two shares. It’s worth it.

As far as energy stocks go, investors will want to concentrate on land drillers like Nabors and Schlumberger. Energy prices are showing no signs of slowing as long as we are still at war in Iraq and Afghanistan.

For those interested in retail, I’ll mention best of breed Sears but I also like a small gamble here as I speculate on Bluefly (BFLY).

There won’t be much action for the next couple months so if you are long, stay long and don’t panic into a sell. My timeline as always is 6-18 months. This gives the market enough time to correct and gives the individual investor time to buy more of a stock they like at a cheaper price.

At the time of this publication, I owned shares of Bluefly (BFLY) but no other stock.

With the summer months here for investors a big question on many investors minds is what to expect this usually drawn out summer. If you follow me you would know that I am a bear, or maybe a better way to put it-a pessimistic individual. Its not that I like to be a negative person, I’ve just felt that the market is due for a big correction at some point. In my mind there will be a dissconnect, as we will see the market move sharply lower in the face of several negative issues.

Those negative issues could be inflation, high energy prices, interest rate, terrorism, or a continuation of negative developments in the housing and sub-prime sectors. i think in the 3rd and 4th quarter we will start to see the housing and sub-prime woes start to really trickle down in the the economy (and consumer)

With this in mind I think Q3 could be a little difficult to navigate. It is important to note that this bull market has been relentless in the face of many of these negative issues which I have talked about. However if the market cracks it may crack in a way that instills more fear into money managers, dragging down the major averages. It is my view that when markets break, the average investor is usually the one that feels the most pain, ordinary investors sadly are always the last ones in on a good market, and tend to always be the last out. This is sadly how history has repeated itself many times.

I will continue to be actively managing my accounts with both long and short candidates.