Two months ago, I had over $1400 in paper profits in NFLX. Forget the peak at $304, I was happy in the $270-280 range. I just had to ride it out until the end of September to get my long term capital gains rate.
Then they announced the price change. Stock dropped sharply. Vulcan was not so happy anymore. But the price got back to around $240...still enough profit to want to wait for the long term capital gains rate. It was almost September, after all.
Then on 9/1, Starz decided to break off negotiations. Stock dropped sharply again. All the way down to $210-ish. Oh man, it's really starting to hurt. But cripes, even though my gains are down to $400ish, waiting another 20 days for the capital gains rate still seems to make sense. I mean, how much worse can it get? The earnings report won't be out until late October, the odds of more bad news coming so soon were low, right?
Wrong. Damn you Reed Hastings. On Monday, Netflix decided to revise their subscriber estimates downward. And the stock tanked, making all of the previous tanks look like child's play. This morning, I decided to throw in the towel and sell to protect my capital investment. A huuuge profit turned into a tiny loss in about eight weeks.
Lesson learned: On momentum growth stocks, never play the "how much worse can it get?" game and try to ride it out. It can apparently get much worse. Take profits when the gains have exceeded your expectations, and then move on to the next stock.
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