Is Roku A Millionaire Maker?

On September 28, 2017, Roku (NASDAQ: ROKU) made its public debut.

At the close of the day, the price was $23.50 a share. In the weeks following its IPO, the stock traded below $17 a share. No one gave it a second thought…

…until Roku reported its first earnings as a public company, and the stock shot up 57%, from around $17 to $26 overnight.

Roku’s earnings caught everyone by surprise, as they beat analysts’ expectations on the top and bottom line.

Today, a $1000 investment in Roku’s IPO is up 540%.

That begs the question: is Roku a millionaire maker?

The answer is: no one knows for sure. But the one thing I do know is that Roku has the qualities that could make it a very big winner over time.

Throughout history, companies that have gone on to become big winners usually have a founder/CEO who is a visionary. Microsoft (NASDAQ: MSFT) had Bill Gates; Apple (NASDAQ: AAPL), Steve Jobs; and Amazon (NASDAQ: AMZN) has Jeff Bezos.

Meet Anthony Wood – the quiet, unassuming visionary CEO behind Roku’s rise.

Although Roku started out as a hardware company, selling sticks, their plan all along was to ultimately become the operating system for streaming video on demand.

Streaming video on demand will be one of the largest secular trends over the next 10 to 15 years. TV – and TV advertising dollars – are in the beginning stages of a very big shift to streaming video.

In that time, Roku has become the leading platform for streaming video on demand.

It doesn’t matter who wins the streaming video war between Netflix, Amazon, Disney, Hulu or any other player. They will all be accessible via Roku.

Here are some numbers that illustrate Roku’s potential:

  • 29,000,000 active accounts
  • Average amount of time users spend on Roku daily: 3.5 hours
  • Amount of content streamed in 2018: 14.8 billion hours
  • If you look at Roku in terms of users, it is the 3rd largest cable provider in the country.
  • Roku TV is the number one licensed TV in the US.
  • One in four smart TVs in the US are Roku TVs.

Right now, Roku has a market value of $11 billion. If the company continues to execute and becomes the operating system for streaming video on demand, that market cap could grow exponentially.

So…is Roku a millionaire maker?

I can’t say for sure. But it has a chance to be!

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page. 

(Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

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How To Go From $5,000,000…To Broke

There’s a show that comes on cable every now and then called “How Winning the Lottery Changed My Life.” The show focuses on past lottery winners – and, for the most part, how they squandered their millions.

It’s unfortunate, but 95% of lottery winners are bankrupt five years after winning the lottery. People who receive a financial windfall in the form of a settlement don’t seem to fare any better.

I don’t know the actual statistics, but I personally know only one person that received a windfall and did something intelligent with her money.

Managing money is not something that comes naturally to most of us. Good money management is a skill that is taught and learned over a period of time.

I want to tell you a true story about a couple that I know of who came into a large sum of money some ten years ago – and how they blew the whole thing.

When average people experience a $5,000,000 windfall, it is usually the result of either a lawsuit or a lottery win. In this particular case it was a lawsuit. After years of deliberation, a settlement was reached, and the couple was awarded $5,000,000.

The first thing they did was buy five brand new cars: an Audi, a Mercedes, a BMW, a Porsche, and a Range Rover. Then they bought a house in Florida for $1,500,000, because they had to have a four-car garage to park their cars in. To furnish the inside of their house they spent $100,000. To beautify the outside, they spent $90,000 on landscaping.

At this point, we are already down to around $3,310,0000 – and there have been no investments made. Not one.

Property taxes, and maintenance on the property, came to a few grand per month. By “a few grand”, I mean close to $5,000. That’s $60,000 a year just to maintain your home!

In addition, let’s not forget that they had to buy each of their adult children a car – and take many  fabulous, luxurious vacations.

Now, by no means am I suggesting that you not enjoy your newfound wealth. You should allow yourself to experience all the wonderful things you would not have been able to otherwise!

However…there is always a smart way and a not so smart way of doing everything in life.

The smart way enables you to do the things you want to do without going broke.

The not so smart way simply leads you to the poorhouse.

One of the main reasons I think people lose their minds when they come into a large sum of money is its liquidity. Liquidity is the ease in which something may be converted into cash. What could be more liquid than cash?

Remember when you were a child and your parents gave you a dollar bill? That dollar bill burned a hole in your pocket. You couldn’t wait to spend it.

Having large amounts of cash can be intoxicating to people that have never had money before. All they know how to do is spend.

Well, I have a theory as to how people that find themselves in this situation can overcome the urge to spend money senselessly.

Like anything in life, it is about your perception.

People with newfound wealth tend to have the wrong perception when they come into money.

I often tell people that if you come into money, you should treat it as though you inherited real estate.

For example, lets’s say your long lost uncle died and left you an apartment building worth $5,000,000. That’s great! But the apartment building is not a liquid asset. You can’t just go out and start buying things with it. For all you know, the building could be underwater, and you could actually owe more than what the building is worth!

In this hypothetical scenario, that’s not the case; the apartment building you now own generates $30,000 a month in positive cash flow. Positive cash flow is the difference between your income and your monthly expenses.

That $30,000 is all the cash you have access to on a monthly basis. You can still blow the entire 30 grand each month you receive it. But you’re less likely to stretch yourself beyond what  your monthly cash flow can cover. You’re kind of forced to be disciplined with your spending.

The importance of viewing windfall money as a non-liquid asset is paramount in your ability to build and hold on to wealth.

That’s how Warren Buffett views money – as a vehicle that is a means to an end. Not as a means to buying anything you can get your hands on!

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)