Source: Charles Schwab NFLX 5-Day Chart April 2022
Netflix Drops 35% in Minutes
Tuesday at the closing bell Netflix was trading close to $350 per share.
Minutes later they announce earnings which contained some disappointments. In those minutes the stock dropped over 130 points and over 35%. Just look at the chart above to understand the scale of the move.
Sure, it would be easy to point to diversification alone as an answer, but there are instances where there are barriers to de-concentrating portfolios and for that we have a solution.
Why Some Investors Are Holding Concentrated Positions
First, if you are choosing to put money into single names or only a few, we would recommend diversification and even better, diversified but hedged!
But others might have worked for a company and have zero or low-cost basis shares they are reticent to sell as there would be tax consequences. Others might have been holding for a while and have low-cost basis. The problem is conventional advisor offerings don’t have a solution that offers value to these investors.
The problem with concentration is they have so much more volatility and risk that plays out time and time again.
Solution That Mitigates Significant Downside Risk in Single Stocks
Again, we advocate a Buy and Hedge approach for portfolios.
But for those situations described above, we can design a personalized approach that can time exits over time, hedge the downside, and look to generate income on your holdings. We have information here including two white papers on the problem and the solution you can access.
For advisors and investors, this has been an unsolvable problem, but at ZEGA we have options!
The reality is a 35% drop in a single day may seem unlikely but moves like this happen ALL THE TIME!