Week 7: Back to Reality

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I have to make a painful confession.

I am a New York Giants fan. Yes, I am a supporter of the 1-6 Big Blue that would likely lose to my high school football team. And being such a supporter, I have oftentimes looked in the mirror and wondered why I put up with a franchise that seems as misguided at the Giants.

Needless to say, it has been a rough season.

This past week, the S&P had a mini-Giants season, recording losses that have been largely unknown to the 9.5 year bull market. On Wednesday, the Dow Jones dropped over 800 points, its largest correction since February 2016. This comes at the hands of increased interest rates, US tensions with China, and an anxious investor pool constantly asking when the real correction will occur. I similarly struggled to bounce back from a correction: the correction of moving away from my comfortable bed at home and back into my subpar dorm bunk after fall break.

Screenshot (5)
Netflix’s chart this past week

Needless to say, Netflix was caught up in that selloff, and while their stock is still a top performer, it was time to snap back to reality. Posting a near 10% loss this week, investors seem to be re-evaluating their interest in the stock.

The press revealed some interesting facts about Netflix’s culture that might’ve shocked some readers. While I am unsure if this would affect the stock price, it does give insight into the decision making of Netflix.

A Wall Street Journal article this week discussed the “culture of transparency” evident at Netflix’s headquarters. Some call it a hostile work environment, one centered around explicit feedback from a “360-review.” This encourages candid critique from employees below and above an individual, enabling a full review that can be very confrontational and uncomfortable. There is zero tolerance for sugar coating, resulting in a culture of fear. Individuals are subject to public scrutiny and blunt firing practices, cited by CEO Reed Hastings as ways to cultivate “openness.”

Image result for 360 review
360 Review

I am not really sure what to make of this news. I think it is important for companies to have full reviews of individuals, both from the upper and lower tiers. Sometimes we don’t realize that those below view us unfavorably, so this tries to cut away at that issue. I’m not a fan of the fear culture, for I think it might make some hesitant to make mistakes in creative ventures.

Once again, I don’t really think this affected the stock price, but it does impact how people view Netflix and can give insight to how their upper management makes decisions.

I think Netflix’s losses this week were spurred by both the loss in the S&P as well as a move towards utilities and household goods from investors. An article from Yahoo finance cites the loss in the tech sector as a whole is due to a movement away from the volatile tech companies and towards more stable investments. My interpretation of this is that it is another move to hedge against the imminent correction. It is likely that tech will be hit hard (as it already has), and investors are looking for less risky places to put their money.

If nothing else, this week has shown that no company, not even the mighty Netflix, is immune to changes in the market.

I am confident, however, that Netflix will rally and continue to reap gains for its shareholders. Unfortunately, the same cannot be said about the Giants. So I sit here, optimistic for Netflix’s future and not so much for the Giants.

Until next week.

 

Sources:

https://www.fool.com/investing/2018/10/27/how-netflix-plans-to-add-up-to-30-million-subscrib.aspx

https://qz.com/work/1439451/the-seven-ways-netflix-culture-sounds-like-your-worst-work-nightmare/?utm_source=YPL&yptr=yahoo

https://finance.yahoo.com/news/best-defense-investors-flee-tech-180800006.html

 

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