It wasn’t long ago that in-home entertainment was limited to whatever was on broadcast TV or what was available at your local video rental store. That all changed in 1997, when Netflix (NFLX) came on the scene, offering a new DVD-rental-by-mail service that eliminated the drive to the video store and opened up a vast library of new and old titles to subscribers for a flat monthly fee. In 2010, Netflix took things a step further, introducing a new streaming media service that, for a flat monthly fee, would allow customers to directly stream content to their homes without having to even get up off the couch. 

Today Netflix operates a trio of businesses: it’s streaming services, DVD and Blu-ray rental by mail, as well a production and distribution for its own series of films and television series. As of 2019, the company had more than 60 million paid subscriptions in the U.S. and a total of 148 million worldwide, where it is currently available in just about every country.  

Netflix reported nearly $16 billion in revenue for 2018 and currently employs about 5,400 people in its offices around the world.

Rationale 

As one of the so-called “FANG” stocks – a list that also includes high-growth stocks like Facebook, Amazon and Google – Netflix has been a darling of many investors in recent years. The most direct way to gain exposure to Netflix is to buy its listed shares, of course, but there are reasons for investors to reconsider that approach, despite its popularity. For one thing, Netflix’s rapid expansion is beginning to slow now that it is available worldwide. It is simply running out of new customers to fuel its growth. What’s more, the company’s push to produce new content and secure rights for existing content around the world has been piling it under a mountain of debt, more than $21 billion as of 2017. That debt load will eventually serve as a drag on its upside potential. 

However, for investors interested in gaining exposure to the streaming media sector, rather than buying NFLX shares themselves should consider buying funds that provide exposure to Netflix and other media firms like CBS, HBO and others. After all, the return drivers that will benefit NFLX might also benefit other similar companies. As investment management is gradually moving to the construction of portfolios using ETFs and mutual funds in addition to single stocks, investors would do well to consider gain exposure to firms like Netflix through these types of funds.

Investing in NFLX 

A search on Magnifi suggests that investors can gain access to Netflix via a number of different funds and ETFs, including those shown below. 

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