It’s pretty uncommon for a stock to gain $86 in one day. But that’s exactly what happened yesterday for Netflix (NASDAQ: NFLX) stock, when shares surged 18%.
A one-day gain of 18% is downright impressive. But would you be surprised to learn that some investors earned much bigger profits? I include myself in a small group of Netflix shareholders who made 121% yesterday.
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Let me start by explaining what happened with Netflix yesterday. Then I’ll explain the secret that let some investors earn outsized Netflix stock profits. Plus, I’ll reveal how you can start making more money from your best growth investments.
Yesterday, Netflix shares opened sharply higher after reporting stellar subscriber growth numbers. With 4.9 million new subscribers during the quarter, Netflix surpassed estimates by 18%.
On the financial side, revenues hit the estimate and EPS fell short. But in the world of fast growth stocks, metrics including subscriber growth trump bottom line profits.
The gain for Netflix added more than $5.2 billion to the company’s value. Netflix is now the sixth most expensive stock in the S&P 500, trading at a forward P/E multiple of 104. The stock is also the best performing in the index, with year-to-date gains of 65%.
How I’m Making Much Bigger Profits
In my Million Dollar Portfolio investment advisory, I bought shares of Netflix at $71 in 2011. At the time, most analysts thought the stock was a dog. A few months after I recommended the stock to my subscribers – and bought it in my investment account – investment legend Carl Icahn started buying Netflix stock.
Today, I still own many of those same Netflix shares. I’ve locked in profits along the way, taking all of my original investment off the table. As a result, the stock I own today is simply a free ride. And it’s still delivering big gains.
The news headlines yesterday reported 18% gains for Netflix stock. But in my Million Dollar Portfolio, the $86 share price increase was a much bigger event.
That’s because my cost basis is just $71 per share. That means that yesterday’s move provided me with a 121% one-day gain. And that brings my current Netflix stock profits to a grand slam of 690% in just four years.
For a select group of investors – including Million Dollar Portfolio subscribers – these big gains from Netflix can be life changing.
Crucial Lessons for Your Portfolio
You may have missed out on Netflix. Don’t worry … you’re not alone. Even many of my own readers were skeptical when I recommended the stock a few years ago. You can’t and won’t catch every big stock market winner. In fact, I consider myself lucky if I discover one stock like Netflix every five years.
There is one hugely important lesson that I want to share. It’s quite simple, and could be the difference between 100% gains and earning 5 to 10 times the profits.
The lesson is simply this: don’t sell your winners. Let them ride.
Through a combination of smart investing and dumb luck, I was able to buy Netflix stock when it was in the dumps.
Within three months, the stock price had doubled. As soon as that happened, something all too common happened. Subscribers started emailing and calling my office, asking if it was time to sell Netflix shares. Meanwhile, my managing editor started asking when I was going to “lock in profits.”
When a stock price moves up, there’s strong pressure to lock in profits. You can put this pressure on yourself … but it also can come from your spouse, friends or even the media.
This is especially true when a stock’s price rises rapidly, as was the case with Netflix. When stocks deliver big gains over long periods of time, this pressure is much less. That’s because the investor psyche views long-term gains as well deserved. Meanwhile, fast profits can be viewed as an act of God … or downright luck.
When you’re invested in a stock that’s moving higher, stick with it. The most difficult thing is picking the right stocks. Once you’ve found a winning stock, let it continue moving higher. Resist that urge to lock in profits.
Growth stocks like Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOGL), Netflix and Tesla Motors (NASDAQ: TSLA) can extend solid gains year after year. By holding onto your fast moving growth stocks – and letting your winners scream higher – you’ll reap the full rewards of your investing prowess. And some day soon, you’ll enjoy 100% gains in a single trading session.
Are you ready to get in on the ground floor of the next growth stock winner? My research team has recently discovered a unique opportunity. One company stands to disrupt a $781 billion industry … and early investors could reap a profit windfall.
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Full Disclosure: I currently own shares of Netflix in the Million Dollar Portfolio investment advisory and in a personal investment account.