Although earnings were reasonably good overall last week, there were some standouts both to the upside and downside. But the winner for biggest earnings news went to Netflix (ticker symbol: NFLX).

The company reported earnings of $3.53 per share, which was well better than analyst expectations of $2.91 per share, and the company’s own guidance, which was for $2.86 per share.

But Netflix also said that they had lost subscribers for the first time in many years, and expected more subscriber losses to come.

They also said that they would introduce advertisements, which was a disaster from my standpoint (although I mostly watch Hulu, which has plenty of ads. Still, when The Crown comes out in November, I don’t want a break in the drama for a geriatric walk-in bath tub commercial).

Despite my ad-related sadness, I felt a little vindicated watching the stock, because I’ve felt like a fool for the last seven years not owning the stock. And in just a few months, all of the outperformance that it enjoyed over the past seven years is now gone.

And, it’s not just about Netflix. In my view, this is why we don’t like growth stocks in general: they are too dependent on meeting ever-higher expectations.

Granted, it’s been hard to own value stocks for the last five years, but the history of the two styles has been that value tends to win the day… but you may have to wait a really, really long time.

I admit that I cheated in the chart above by starting at the point where I knew that the chart would look perfect. But the point is that if you had purchased the stock any time after 2015, you wouldn’t have done any better than the market.

And I’ve had plenty of calls in the last seven years of people wanting to buy Netflix. After all, they watch it. I watch it. Everyone we know watches it. With Squid Games and other international shows, everyone around the world watches it. What could go wrong?

Well, all of that success creates success, but it also creates challenges. In 2015, there weren’t many competitors. I don’t have the numbers from 2015, but Netflix has 20 percent of the streaming business, and I think we can agree that it had much more market share in 2015. Disney Plus, which has 11 percent of the current share, didn’t exist.

Second, as noted above – almost everyone in the world already watches, so the growth prospects going forward are much less than in the recent past. One way to achieve growth is to crack down on people who share usernames and passwords. That’s good, but not the same as entering a new country or continent.

Third, it’s hard to generate great content. I used to think Netflix had an unlimited library, and while there is a lot I haven’t watched, I don’t feel like the content is as good as it once was. In the early days, they got content from everyone.

But now, NBC, Paramount, Disney, and others don’t want to give away their content to Netflix because they have their own streaming networks. If it is on Netflix, it’s because Netflix paid a hefty price.

Lastly, their subscriptions are pricier. I remember when there was just one service, and it was $9 a month. Compared to my basic cable, it was simple and super cheap.

You can still get $9 per month, but it’s standard definition and only one person can use it at a time. I’m a standard user, which allows my kids to watch and has better definition, but is $15.50 per month, more than 50 percent more than what I paid 5-6 years ago. I think it will be hard to raise prices by another 50 percent in the next five years.

With the massive selloff, Netflix may be worth buying. We have a process that we use that ranks stocks on their financial health and valuation relative to other stocks in the sector, and it will be interesting to see how it compares when we run the process next.

But, again, this story isn’t so much about Netflix as it is, high-priced growth stocks, and why we stay away from them. Some of our stocks had a rough week last week, falling by more than 10 percent. No process is immune to big losses, which is why you diversify.

But the story of expensive stocks that fall precipitously when growth expectations aren’t met is an old one. Some of you may remember the Nifty Fifty back in the 1960s. They were the hot stocks of the day, and investors paid a lot for them. Most did not live up to expectations, and performance was poor.

There’s an old saying that there is no such thing as a bad investment, only a bad price. I love Netflix as a user (ad-free), but the price seemed pretty bad for a long time. I don’t know if it’s a good investment now, but the price is a lot more reasonable now that the price is one-third of what it was at the start of the year.