- JJ Kinahan, the chief market strategist for TD Ameritrade, said investors are adopting a clear strategy as the streaming wars heat up.
- Kinahan said Roku's surging share price reflects the fact that traders are betting on distributors of streaming entertainment rather than the companies that produce them.
- Roku and Disney were two of the most popular stocks with TD Ameritrade clients in September, while Netflix and Apple fell out of favor.
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Streaming services have so many options that it can be hard to decide what to watch. Fortunately, investors aren't having that kind of decision fatigue when it comes to the streaming wars.
TD Ameritrade, which has $1.3 trillion in client assets, says streaming device company Roku was one of the four biggest buys for its clients in September, while Netflix was one of the most-sold stocks that month.
JJ Kinahan, the brokerage giant's chief market strategist, said that reflects an evolving view of streaming. While Netflix in particular has enjoyed giant returns as it's produced and shared more original movies and shows, Roku benefits from Netflix's streaming service and from those of its rivals.
"The way people want to play streaming is more towards 'we don't care who's the winner of the production model, we care who's the winner of the distribution model,'" he told Business Insider in an exclusive interview.
On the production side, Netflix and its rivals are spending more and more money to produce the content that wins them more subscribers and earns the companies more revenue. But people only have so much time and so much disposable income, which means the fight for subscribers becomes a zero-sum game.
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That's one reason analysts and investors have gotten nervous about Netflix stock in the last few months.
On the other hand, Roku can win no matter how that contest turns out. That understanding may have contributed to the stock's almost 300% surge this year.
"Roku might be a little bit more of a hedge," Kinahan said. "They would rather own Roku, which is the distributor, rather than Netflix, which is the producer, although of course they are a distributor also. But their distribution model is getting a hit with other competitors."
And one of its chief competitors was also a big winner in September, as Disney joined Roku on the list of most popular buys for TD Ameritrade's clients. Kinahan said that reflects a remarkable turnaround for Disney after it bought most of Fox's entertainment assets this year.
"What's really amazing to me is, if you look back two years ago, what was the one thing we were all nervous about with Disney, and that was their streaming because of ESPN and how it was getting chopped up," he said of ESPN's subscriber losses. "Now, suddenly you turn around and it's nothing but opportunity."
