We Study Billionaires - The Investor’s Podcast Network TIP711: Netflix, Ferrari, & Managing Market Volatility w/ Arif Karim
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Apr 4, 2025 In this engaging conversation, Arif Karim, a seasoned Co-Portfolio Manager at Ensemble Capital with over 25 years in investing, shares insights on Netflix and Ferrari. He discusses Netflix’s evolving strategies to combat subscriber growth challenges and the importance of its competitive moat. Arif also highlights Ferrari’s unique market position and adaptability, especially during economic downturns. He delves into both companies' valuation approaches, emphasizing innovation and resilience as key to success in fluctuating markets.
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Great Business Characteristics
- Great businesses offer substantial customer value while achieving high returns on capital.
- They protect their business with moats against profit margin commoditization and sustain long-term growth.
Netflix's Moat
- Netflix's scale lets them amortize content costs over a massive subscriber base, lowering per-customer expenses.
- Their technology, customer focus, and experimental culture contribute to their competitive edge.
Netflix's 75% Drop
- Netflix stock dropped 75% between late 2021 and mid-2022 due to stalled subscriber growth and market overreaction.
- Arif Karim's team at Ensemble Capital held on, reassessed their thesis, and bought more, demonstrating conviction.