[GregWeld]

Since we just talked about stock splits and high P/E ratios - and whether or not EARNINGS were important etc....

NetFlix (NFLX) just split it's stock 7 for 1 - meaning for each share you owned - you'd now own 7 times as many -- but that also divides the price by 7 as well.

They had an EXTREMELY high P/E.... IIRC -- 181 !!! Which is just a WOW number.

But let's remember how it got that kind of a P/E... It's because people (buyers) have very high expectations for GROWTH of the business and therefore the EARNINGS.

THEIR EARNINGS just announced today after the close - which beat the street estimates... and they added 3 million new subscribers in the quarter....

The stock spiked after hours by 10%.

Now - let's also take into account that everyone that owned the shares... now has 7 times MORE shares in their accounts! Sometimes - people sell off some of the shares and we know what happens when there's more sellers than buyers... you see a price drop. BUT --- the split is supposed to drive demand from the smaller investor who's willing to pay (in this case) $100 a share versus $700 a share. So perhaps there's buyers coming in, to acquire new shares of the stock. Who the heck knows.

I'll tell you what I do.... I never trade *buy or sell - a stock based on a perceived or announced split. Splits in themselves do not add value. They might temporarily drive some excitement - but that's usually short lived.... In the long run - we want to INVEST in companies that we think will do well going forward. End of story.

I have a significant portfolio -- and I own a whopping 100 shares of NFLX (now it's 700).... because while I think it's a growth story -- it doesn't pay me a dividend - AND more importantly - the AIR / FROTH / PE will come down far faster than it goes up when they have 180 ish P/E!!!! These stocks work when they're working -- and they really really stink up the joint if they so much as whisper that their growth is slowing or their earnings aren't up to snuff.