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Learning, Sharing, and Teaching => Investor Alley => Topic started by: MacGyverIt on May 03, 2012, 07:03:56 PM

Title: Facebook IPO
Post by: MacGyverIt on May 03, 2012, 07:03:56 PM
Anyone else thinking about the FB IPO?

I didn't buy Google back in the day and e-gad was I all together wrong. For me, the challenge of the stock market is realizing that it's not all math, there is a great deal of emotion-based trading that goes on. Sure, everyone is as excited now as they were with Google -- but what were the lessons learned? It may not make sense logically but it still may be profitable. Apple was a solid, no debt and profitable company long before the iPod but it was that start in a series of devices which made sense to the market despite the all ready handsome price to earnings ratio.

Facebook? No clue, I've seen a few FB pages and I don't understand their business model any more than I understood Google's model. But are there times - such as this - when banking on the emotion of the market makes just as much sense as crunching the (not even remotely transparent) numbers?
Title: Re: Facebook IPO
Post by: arebelspy on May 03, 2012, 07:39:49 PM
I'm too worried about an Internet bubble 2.0.

1B for Instagram, 300MM for Draw Something, etc.  The crazy valuations going on scare me.

And I'd rather not try to outguess the market.

FB may be around awhile, but NewsCorp thought the same about MySpace, so... I donno.  Would rather not put my money in thinking that I do know, on a gamble.  YMMV.
Title: Re: Facebook IPO
Post by: MacGyverIt on May 03, 2012, 08:03:46 PM
I'm too worried about an Internet bubble 2.0.

1B for Instagram, 300MM for Draw Something, etc.  The crazy valuations going on scare me.

But it wasn't a crazed public that bought Instagram, it was a crazed (?) Facebook/MZ.

And even if it's crazed the question isn't sane or insane, the question is when to profit (or potentially lose) against the emotional trading? Amazon, Google?
Title: Re: Facebook IPO
Post by: fiveoh on May 03, 2012, 08:18:06 PM
Too much risk(i.e. uncertainy) and no dividend... I wont be buying any.  If I had some extra cash to throw around I might for the reasons you stated.  I saw an article on the news the other day facebook was having a push to get people to sign up to be organ donors.  On a normal day they have less than 400 people that sign up, once facebook pushed it they had over 6000 in one day.   They definately touch a lot of people and I dont think they are going anywhere soon. 

I have to agree with you on the internet bubble 2.0 maybe happening though...
Title: Re: Facebook IPO
Post by: James on May 03, 2012, 08:32:34 PM
Facebook is huge.  It's going to keep growing and start making big money.  It's growth potential is absolutely crazy.  It is imbedded so deeply in the lives and habits of an incredible number of people.  It reaches into the business word, not just social, and it's global, not limited to North America.  It's going to continue to amaze everyone.


Until it doesn't...


Some company will come out with something better and Facebook will screw up big time.  Life goes on.


I have absolutely no desire to speculate with my money on individual stocks.  I actually enjoy talking about stock at times, I remember telling friends I should really be buying Apple at $120, but for better or worse I don't buy them...
Title: Re: Facebook IPO
Post by: MacGyverIt on May 03, 2012, 08:33:35 PM
I have to agree with you on the internet bubble 2.0 maybe happening though...

The first internet bubble took place at a time when many people still didn't have or use internet consistently outside of email and web surfing but those web-based store fronts (i.e. pets.com) IPO'd very well. Instagram was an insane purchase price --- not an IPO. Groupon is slowly dissolving. The "Coke and Pepsi" equivalents in this space -- Apple, Google, Amazon and *possibly* Facebook -- will be left to duke it out as the gods of Tech Olympus. So amongst those, who has the most vociferous user base? How can be left/acquired/returned to (from the user perspective)?

To reiterate, these points may not even matter when the emotionally driven market kicks in and some stocks rise and fall based upon these unpredictables.
Title: Re: Facebook IPO
Post by: MacGyverIt on May 03, 2012, 08:35:18 PM
I actually enjoy talking about stock at times, I remember telling friends I should really be buying Apple at $120, but for better or worse I don't buy them...
So weird... I did buy Apple at $120 however I have friends who bought at $35 when it made no sense to do so...
Title: Re: Facebook IPO
Post by: fiveoh on May 04, 2012, 04:55:40 AM
I have to agree with you on the internet bubble 2.0 maybe happening though...

The first internet bubble took place at a time when many people still didn't have or use internet consistently outside of email and web surfing but those web-based store fronts (i.e. pets.com) IPO'd very well. Instagram was an insane purchase price --- not an IPO. Groupon is slowly dissolving. The "Coke and Pepsi" equivalents in this space -- Apple, Google, Amazon and *possibly* Facebook -- will be left to duke it out as the gods of Tech Olympus. So amongst those, who has the most vociferous user base? How can be left/acquired/returned to (from the user perspective)?

To reiterate, these points may not even matter when the emotionally driven market kicks in and some stocks rise and fall based upon these unpredictables.

I was talking to a friend the other day about the facebook IPO... hes a little older than me(50s) and mentioned he just couldnt come to grip with the valuation of it.  They have no real assets(well probably a bunch of computer equipment but not worth anything close to that amount) its all just information, little 0sand1s. 

I realize information and the accessiblity to all those people is worth $$$ but really they have no real goods and their service is NOT something you need(despite what some users might think).   
Title: Re: Facebook IPO
Post by: arebelspy on May 04, 2012, 07:55:26 AM
Buffett says it's not a bubble, but also says he has no plans to invest in Facebook IPO.

http://m.cnbc.com/id/47292704
Title: Re: Facebook IPO
Post by: rjack on May 04, 2012, 11:11:59 AM
I don't invest in any HOT stocks. My excitement about a stock in inversely proportional to the public and media interest.
Title: Re: Facebook IPO
Post by: Fetlock on May 04, 2012, 11:21:06 AM
One way Facebook makes money is by skimming 30% of in-game purchases for games run on their platform. Not to mention, said games are paying Facebook a lot of money to run ads, too. However, I feel like FB has really killed the desirability of their platform for games in the past couple years. A few years ago, they didn't take 30% and ads were far, far more effective than they are now. I doubt the company I work for would even exist right now if it had had its beginnings in the conditions that exist today. I expect that a lot of the smaller companies are going to get strangled out of competition, and even though the big ones like Zynga might thrive because they can afford to buy a massive audience, they're still searching for another platform (in fact, they're launching their own). So I think Facebook may be killing a golden goose for the sake of short-term profits.

On the other hand, though, that goose may be only one of many in their flock. I wouldn't underestimate the value of human attention, as it is one of the hardest and most costly resources to obtain for an online service, and if you can get it, you can choose almost any number of ways to profit from it.

As for buying stock, I'm toying with the idea of throwing in a small amount for the sake of experimentation. I have my doubts about it being a good long-term buy, but I'm curious how it'll work out in the short term. But I haven't decided yet.
Title: Re: Facebook IPO
Post by: palvar on May 04, 2012, 11:27:33 AM
A few years ago, they didn't take 30% and ads were far, far more effective than they are now.

I am still really uncomfortable with the ads that Facebook and Google make their money off of.  I don't think I've ever clicked on a web ad on purpose - and I've never bought anything that I find through a web ad.
Title: Re: Facebook IPO
Post by: Fetlock on May 04, 2012, 12:02:00 PM
I don't think I've ever clicked on a web ad on purpose - and I've never bought anything that I find through a web ad.

Speaking from the perspective of a Facebook game, most people don't, but those aren't the ones to buy ads for, either. Maybe 1~2% of the people who click on an ad will actually end up buying anything, and even they're not the ones to buy ads for. It's the whales. The rabid ones who are insane enough to spend thousands of dollars on a game. Those rare ones who spend an absurd amount of money make up for all the others put together. Zynga practically stalks their whales (who have spent $10,000+) and tailors their games to extract the most money from them. (I've heard that their metrics framework actually outweighs the code in any given game. They. Watch. Every. Move.) All the other users serve only two purposes: to invite potential whales, or to be fodder for the whales.
Title: Re: Facebook IPO
Post by: elai on May 04, 2012, 11:46:32 PM
Facebook has 901 million monthly active users, and nearly half of that are daily actives.  3 months ago, monthly actives was 845 million.  It's still growing at a ridiculous rate and is probably going to hit that magic 1 billion mark pretty soon.  People use facebook's network to grow profitable businesses as a marketing platform, and they're not facebook games.  Nobody is really accusing facebook of being horribly unprofitable and shady like groupon at the start, they make a solid $1billion profit to ~$3 billion in revenue:
http://techcrunch.com/2012/02/01/facebook-1-billion-profit/

You can see their pre-ipo roadshow here:
http://facebook.retailroadshow.com/show/retail.html?m&u=27962#

I think part of facebook's problem is that people don't understand why it's so successful in the first place.  It seems so simple at the surface.
Title: Re: Facebook IPO
Post by: smedleyb on May 06, 2012, 02:02:59 PM
Social media will be one of the hottest growth areas over the next decade.  I want to own it,  just not sure where the proper entry point is.

I'll say this, companies like FB or LNKD will be high on my buy list when this cyclical bull runs it's course and stocks come for sale.  Could be 2 weeks from now, could be 2 years from now.   
Title: Re: Facebook IPO
Post by: arebelspy on May 06, 2012, 04:42:20 PM
Facebook has 901 million monthly active users, and nearly half of that are daily actives.  3 months ago, monthly actives was 845 million.  It's still growing at a ridiculous rate and is probably going to hit that magic 1 billion mark pretty soon.  People use facebook's network to grow profitable businesses as a marketing platform, and they're not facebook games.  Nobody is really accusing facebook of being horribly unprofitable and shady like groupon at the start, they make a solid $1billion profit to ~$3 billion in revenue:
http://techcrunch.com/2012/02/01/facebook-1-billion-profit/

You can see their pre-ipo roadshow here:
http://facebook.retailroadshow.com/show/retail.html?m&u=27962#

I think part of facebook's problem is that people don't understand why it's so successful in the first place.  It seems so simple at the surface.

Okay, so they make 1BB.  Sounds nice.  But the valuation they want is 100BB.

I'm gonna steal some stats from this slashdot article on the facebook IPO:
http://news.slashdot.org/story/12/05/02/1750257/facebook-to-go-public-on-friday-may-18

Quote
a $100 billion company should be making a truckload more than that.

google (current market cap $200billion) pulls in about $10billion in quarterly revenue...

judging by that facebook is at best a $20 billion company. about 1/10th the size of google.

yeah, it is a bit more complicated than that, but still facebook is worth nowhere near $100 billion. and really they don't have a whole lot of growth left, they have saturated their market pretty well.

...

Quote
I took a quick scan of GOOGs 2011 numbers and they have about the same profit margin and a better debt ratio than Facebook, so it's hard for me to see the justification for having 1/2 the market cap of GOOG with ~1/10th the revenue and 1/10th the net income.

So why exactly is FB worth 1/2 of google with 1/10 the revenue?  The only reason possible is growth, and that's projecting their growth to be RIDICULOUS.  It's a huge gamble to bet on that IPO, and their revenue doesn't warrant a 100BB IPO, despite 1BB in profit sounding nice.

Oh, and that Draw Something acquisition by Zynga I mentioned three days ago in the first reply in this thread ( had said 300MM, it was only 200MM, I remembered it wrong)?  This article, posted today, shows why that may have been a bad idea:
http://gigaom.com/2012/05/06/draw-something-nosedives-is-zynga-losing-its-touch/
Title: Re: Facebook IPO
Post by: shedinator on May 07, 2012, 07:49:00 AM
There's no way the P/E on Facebook holds up. It's got to be opening at something like 50/1 or 100/1, and I just don't see that holding up long term. I'll stick with buying the market, and let the other 499 stocks in my profile continue to act as a buffer against major losses from 1. Whether Facebook ends up being one of those 500 is up to S&P.
Title: Re: Facebook IPO
Post by: Mr Mark on May 14, 2012, 10:35:46 AM
There's no way the P/E on Facebook holds up. It's got to be opening at something like 50/1 or 100/1, and I just don't see that holding up long term. I'll stick with buying the market, and let the other 499 stocks in my profile continue to act as a buffer against major losses from 1. Whether Facebook ends up being one of those 500 is up to S&P.

Exactly. If it's a great company, I'll be owning it as a part of several funds. If it grows, I'll get that.

If it tanks and drops out of the indexes, that's OK too, because I'm diversified and will have 'auto-balanced' the company out of my portfolio on its way down!

If you really want to be 'overweight' in FB, why not add a low-cost internet/tech fund and thus bet on the entire Internet growing (which seems a good bet), rather than trying to pick winners [MySpace anyone?]

Lastly, if you have a very small % of your stash assigned for gambling, hey, it's your money. But the data strongly suggests that, over time, you are likely to reduce your stash's performance by doing so.
Title: Re: Facebook IPO
Post by: Mr Mark on May 18, 2012, 03:23:31 PM
Anyone else thinking about the FB IPO?

I didn't buy Google back in the day and e-gad was I all together wrong. For me, the challenge of the stock market is realizing that it's not all math, there is a great deal of emotion-based trading that goes on. Sure, everyone is as excited now as they were with Google -- but what were the lessons learned? It may not make sense logically but it still may be profitable. Apple was a solid, no debt and profitable company long before the iPod but it was that start in a series of devices which made sense to the market despite the all ready handsome price to earnings ratio.

Facebook? No clue, I've seen a few FB pages and I don't understand their business model any more than I understood Google's model. But are there times - such as this - when banking on the emotion of the market makes just as much sense as crunching the (not even remotely transparent) numbers?

Note: Since the above, FB listed, brief bounce up 11%, then share price fell and had to be supported by the underwriters on Day One. Ended the day up 0.7%. Victory for the original owners of FB!
Title: Re: Facebook IPO
Post by: MacGyverIt on May 19, 2012, 08:16:22 AM
Note: Since the above, FB listed, brief bounce up 11%, then share price fell and had to be supported by the underwriters on Day One. Ended the day up 0.7%. Victory for the original owners of FB!

I watched the FB opening on the news networks - weird how several were running it live! - and kinda laughed at how the hype fell so completely flat. Glad I didn't put any money down. Not to say I won't down the road, it'll be interesting to see how this plays out over the next few months.
Title: Re: Facebook IPO
Post by: Mr Mark on May 21, 2012, 08:40:28 AM

Note: Since the above, FB listed, brief bounce up 11%, then share price fell and had to be supported by the underwriters on Day One. Ended the day up 0.7%. Victory for the original owners of FB!

Second day of trading and already down 11% to $34 from IPO of $38.
Title: Re: Facebook IPO
Post by: tooqk4u22 on May 21, 2012, 02:15:06 PM
I watched the FB opening on the news networks - weird how several were running it live! - and kinda laughed at how the hype fell so completely flat. Glad I didn't put any money down. Not to say I won't down the road, it'll be interesting to see how this plays out over the next few months.
[/quote]

Second day of trading and already down 11% to $34 from IPO of $38.
[/quote]

These two responses are related because the initial price discussion was in the $24-28/share range then they kept upping the range as the hype grew - the reality is that they didn't leave any money on the table for the IPO investors as usually customary. 
Title: Re: Facebook IPO
Post by: zweipersona on May 21, 2012, 03:40:21 PM
The reason Buffett doesn't invest in it is because there's no historical data to follow, nor does he know the market.  Or so I think his thinking would go.

I would invest.  Myspace ONLY crumbled because Facebook came out.  Will something come out that beats facebook?  The short answer is... no.

An incredible amount of individuals use facebook.  It's even gone global.  And more and more corporations make use of it as a marketing platform.  It's also doubling up as a way to connect with friends via games online.  It's DIVERSIFYING.

Any company that successfully diversifies is gold in my book.  I don't see Facebook disappearing.

I would question if it could continue to grow.  It can continue to reach more business and individuals, but that's largely stagnant now.  I'd wager if there is growth, it would be in its gaming sector;  not only for the Zynga and other games it is known for, but also to connect to other gamers by letting facebook import contacts (Blizzard [A gaming company, known for World of Warcraft] was looking into this, and might be doing it now)
Title: Re: Facebook IPO
Post by: grantmeaname on May 21, 2012, 05:21:11 PM
And that is the reason why owning single stocks is risky. In one sentence, you say that facebook's hold on the market won't be disrupted by innovation. In the next, you mention that you think a dramatic change is headed for the market, and it's one with several entrepreneurial, customer-loved, agile, well managed companies competing. Zynga plans to launch its own social platform, and Xbox Live, Valve's Steam, and Blizzard's Battle.net are interested in expanding their service offerings to do more "social" along with the gaming.
Title: Re: Facebook IPO
Post by: zweipersona on May 21, 2012, 07:20:56 PM
And that is the reason why owning single stocks is risky. In one sentence, you say that facebook's hold on the market won't be disrupted by innovation. In the next, you mention that you think a dramatic change is headed for the market, and it's one with several entrepreneurial, customer-loved, agile, well managed companies competing. Zynga plans to launch its own social platform, and Xbox Live, Valve's Steam, and Blizzard's Battle.net are interested in expanding their service offerings to do more "social" along with the gaming.

If you're referring to me, sorry, I didn't want to spend too much time on a topic I don't have significant knowledge of.  I only have the knowledge a consumer would.

That said, Xbox Live, and Battle.net, both integrate Facebook in some way.  They don't intend to replace it.  It's likely steam will go a similar route.  I don't know what Zynga intends to do, but if the plan is to try to copy Facebook... they'll fail.

That was my entire point really.  Facebook has become THAT large.  Global users.  Businesses.  Integrated as a way to import contacts for email, game, and various other accounts.  I don't see Facebook being replaced.  I do see niche sites stealing away users.  (Such as LinkedIn being primarily used by job searchers/networkers)
Title: Re: Facebook IPO
Post by: Mr Mark on May 21, 2012, 09:04:11 PM
I would invest. 

If you're referring to me, sorry, I didn't want to spend too much time on a topic I don't have significant knowledge of.  I only have the knowledge a consumer would.

That was my entire point really.  Facebook has become THAT large.

Thank you zwei! Was there ever a better argument to not buy FB?
Title: Re: Facebook IPO
Post by: zweipersona on May 21, 2012, 09:41:02 PM
I would invest. 

If you're referring to me, sorry, I didn't want to spend too much time on a topic I don't have significant knowledge of.  I only have the knowledge a consumer would.

That was my entire point really.  Facebook has become THAT large.

Thank you zwei! Was there ever a better argument to not buy FB?

Uh... I said what I would do, and why.  And gave my background knowledge of the company, which isn't significant.

I fail to see how that's an argument AGAINST buying the company.  At worst, it means nothing at all, given my opinion could be completely worthless to you.  And I wouldn't blame you one bit.

But hey, if the opinions of some random guy on the internet somehow DO impact your financial decisions, maybe you need to rethink both your priorities in life and your portfolio :P
Title: Re: Facebook IPO
Post by: arebelspy on May 21, 2012, 09:44:30 PM

I fail to see how that's an argument AGAINST buying the company.

When the public who doesn't know much (your words; no offense intended) would invest, it's maybe a bad idea to do so.
Title: Re: Facebook IPO
Post by: zweipersona on May 21, 2012, 11:55:27 PM

I fail to see how that's an argument AGAINST buying the company.

When the public who doesn't know much (your words; no offense intended) would invest, it's maybe a bad idea to do so.

You should know better. 

The fact that there's more people willing to buy something has no bearing on the success or failure of the stock.  At worst, you're back at chance.

Sometimes the public is right, sometimes it's wrong.  The stock market isn't inversely correlated to public opinion.  Though I'm sure there's plenty of people who wish stock was that simple.

Frankly I'm a little shocked by both your commentary, and the one above.  I guess it's almost a political topic of sorts for people?  I just see a large company, that's gone global, and has its hand in various subjects.  That diversification has been a mark of success for previous companies.
Title: Re: Facebook IPO
Post by: grantmeaname on May 22, 2012, 06:56:59 AM
My point is that the market is complex and there are all sorts of complicated moves being masterminded by very smart people. There's no reason to argue that Zynga can't succeed given that they've made themselves one of the largest gaming companies in the world in a handful of years, and there's no way you can know whether or not Valve's plan will work. Given all that, it seems like a better idea to allocate resources to the sector as a whole if you want 'in' on tech happenings than to any individual player.
Title: Re: Facebook IPO
Post by: Ben on May 22, 2012, 07:31:26 AM
Arguments against:
1. IPOs usually are a bad purchase for the consumer, since they are timed (by the company) to sell at the TOP (if Mark Zuckerburg thought the company's valuation would continue to increase at faster-than-market rates, he would continue to own it privately).

2. Facebook (wisely) increased the price to match the hype, in order to make as much money as possible (a big IPO 'pop' just means that the company left money on the table).

3. P/E ratio for Facebook is very, very large (something like 80-100). Facebook will need to sustain much-faster-than-market growth for an unusually long time to reach a good valuation for the purchase. This will probably not happen since, again, Facebook's owners want to sell at the top of the bubble.

Arguments for:

1. If you already have enough money and want to go along for the ride, or share in the pride/joy of owning such a big-name stock, you can say you got in at the beginning.

2. If you believe in the 'greater fool' theory of investing, you may believe that there are greater fools following after you who will overpay for the stock even more than you did.

3. You may have an unusually clear vision/insight into the future which assures you that Facebook will still be a cultural force and profitable company in 10-20 years.
Title: Re: Facebook IPO
Post by: arebelspy on May 22, 2012, 08:22:00 AM
The fact that there's more people willing to buy something has no bearing on the success or failure of the stock.  At worst, you're back at chance.

I disagree.  Oftentimes when random people who know nothing about it on the street are buying in due to hype, that's an indication of a bubble.  Or would you say all the people buying houses in 05 had nothing to do with the bearing of success or failure of the housing market?  Or all the people buying tech stocks in '98-99, etc. etc.  Of course it's not absolutely correlated, but it can be an indicator.

Frankly I'm a little shocked by both your commentary, and the one above.  I guess it's almost a political topic of sorts for people?

I'm not sure what you mean by this.  My only actual opinion in this thread was in the first reply, stating (and adding emphasis on the important parts):
Quote
I'm too worried about an Internet bubble 2.0.

1B for Instagram, 300MM for Draw Something, etc.  The crazy valuations going on scare me.

And I'd rather not try to outguess the market.

FB may be around awhile, but NewsCorp thought the same about MySpace, so... I donno.  Would rather not put my money in thinking that I do know, on a gamble.  YMMV.
Title: Re: Facebook IPO
Post by: Mr Mark on May 22, 2012, 08:49:53 AM
I would invest. 

If you're referring to me, sorry, I didn't want to spend too much time on a topic I don't have significant knowledge of.  I only have the knowledge a consumer would.

That was my entire point really.  Facebook has become THAT large.

Thank you zwei! Was there ever a better argument to not buy FB?

Uh... I said what I would do, and why.  And gave my background knowledge of the company, which isn't significant.

I fail to see how that's an argument AGAINST buying the company.  At worst, it means nothing at all, given my opinion could be completely worthless to you.  And I wouldn't blame you one bit.

But hey, if the opinions of some random guy on the internet somehow DO impact your financial decisions, maybe you need to rethink both your priorities in life and your portfolio :P

Zwei,
It's considered a sign of a 'bubble' or over-hyped investment when 'ordinary members of the public' think it's a good idea but don''t understand the investment. Such things tend to happen near the top of a bubble.

My comment was an oblique reference to 'the shoeshine boy'. It's claimed JFK's father, Joe Kennedy knew it was time to get out of the market in 1929 when he received investing tips from a shoeshine boy. Ever since, the shoeshine boy has been a metaphor for "time to get out"; for the end of the bubble phase in which everyone, even the shoeshine boy, wants in.

And your 2 quotes (not even taken out of context) captured that metaphor.

Thus, even 'the opinions of some random guy on the internet' could indeed be taken as data that can advise an investment decision.

If you want to to buy FB stock, go for it. It's just too much like blind gambling for me to invest in except indirectly through mutual funds.

Title: Re: Facebook IPO
Post by: zweipersona on May 22, 2012, 09:50:42 AM
The fact that there's more people willing to buy something has no bearing on the success or failure of the stock.  At worst, you're back at chance.

I disagree.  Oftentimes when random people who know nothing about it on the street are buying in due to hype, that's an indication of a bubble.  Or would you say all the people buying houses in 05 had nothing to do with the bearing of success or failure of the housing market?  Or all the people buying tech stocks in '98-99, etc. etc.  Of course it's not absolutely correlated, but it can be an indicator.

... In the same way higher ice cream sales are correlated to drownings, maybe. 

People also had similar reactions to Apple and Google.  Both are doing fine.  Even if I grant you the examples where the public was wrong, and the investment would've failed, there are other examples where the opposite is true. 


And Mark, that's a story, a wives tale.  A way for people to talk about an event.  Like arabelspy pointed out, sometimes there is some truth to it.  Other times, there is not.  And that's because public opinion could in no way cause a stock to decrease.  There is a reason people continue to talk about the 'housing bubble' and why there was a collapse.  But gentlemen, if you want to stand up and give a speech to a few economic educators and PhDs in the future to let them know that you have the obvious knowledge that the public opinion was the cause for economic collapse, be my guest. 

And if that's indeed the case, that random opinion on the internet could fuel investment decisions, you should take note of what there is here.  On one forum, you can find a 'Yes' 'No' and 'Maybe', if your question is to invest in FB.  All of them fueled by speculation and various bits of data that may or may not apply to this particular investment.  None of them have insider knowledge.  It's all speculation. 

But in the end, you have the exact opinion that I do.  When it comes to money, I diversify.  If I were to own FB, it would be in a portfolio of other companies.  Diversification is a proven investment strategy.  I would never say 'Invest all your money in FB and you'll be a multi millionaire in a year' but I see no reason it can't join someones portfolio.
Title: Re: Facebook IPO
Post by: Mr Mark on May 22, 2012, 10:10:27 AM

I know the story's probably apocryphal, but it's hung around with good reason.

It captures the spirit of contrarian investing and the old Buffet homily. When ordinary people think they can beat swathes of well funded & informed professional investors in the most cut-throat competitive environment there is, it's often (but not always) a sign to do the opposite.

I think picking individual stocks is too risky, and the data shows it degrades portfolio performance.

A diversified portfolio with allocations to distinct asset classes periodically rebalanced seems to be the best way for an ordinary person to reliably gain from the system no matter what the market does.
Title: Re: Facebook IPO
Post by: rjack on May 22, 2012, 10:44:18 AM
I think picking individual stocks is too risky, and the data shows it degrades portfolio performance.

I think that depends entirely on who is doing the picking. For instance, investors that can't read corporate financial statements (balance sheets, income, cash flow) should not invest in individual stocks. However, if you understand statements, have intimate knowledge of an industry, and the right temperment, then the odds tip in your favor.
Title: Re: Facebook IPO
Post by: grantmeaname on May 22, 2012, 12:12:51 PM
That's emphatically not true.
Title: Re: Facebook IPO
Post by: skyrefuge on May 22, 2012, 12:27:59 PM
And that's because public opinion could in no way cause a stock to decrease.

What then, causes a stock price to decrease (or increase)?  Weather patterns?  Sunspots?

Yeah, if an opinion has no connection to economic an decision, then it won't have any economic effects, but in reality, many (most?) economic decisions are *driven* by opinion!
Title: Re: Facebook IPO
Post by: Mr Mark on May 22, 2012, 01:01:37 PM
I think picking individual stocks is too risky, and the data shows it degrades portfolio performance.

I think that depends entirely on who is doing the picking. For instance, investors that can't read corporate financial statements (balance sheets, income, cash flow) should not invest in individual stocks. However, if you understand statements, have intimate knowledge of an industry, and the right temperment, then the odds tip in your favor.

Sounds there's a big paying job waiting for you in Wall Street! The characteristics you list describe people called analysts, and even these people most of the time [80% is a stat that springs to mind?] can't beat the market. But hey, maybe you're that good. And it's your money.

I guess in the end there are these 2 over-arching investment philosophies:
- go low fee, market indexes/perm. portfolio/rebalance, invest regularly and don't fret it. Your time-frame is >30yrs.
- actively manage, buy and sell, invest in individual stocks, technical analysis, et al.

I prefer the first, but could stand having ~5% of my stash being treated as 'speculation money', if I enjoyed it and wasn't chasing losses. I like to gamble - but to do that I usually play poker, not with my stash.
Title: Re: Facebook IPO
Post by: rjack on May 22, 2012, 03:49:56 PM
I think picking individual stocks is too risky, and the data shows it degrades portfolio performance.

I think that depends entirely on who is doing the picking. For instance, investors that can't read corporate financial statements (balance sheets, income, cash flow) should not invest in individual stocks. However, if you understand statements, have intimate knowledge of an industry, and the right temperment, then the odds tip in your favor.

Sounds there's a big paying job waiting for you in Wall Street! The characteristics you list describe people called analysts, and even these people most of the time [80% is a stat that springs to mind?] can't beat the market. But hey, maybe you're that good. And it's your money.


I actually invest exactly like you do, but go ahead and assume away! Just be more careful with your assumptions when you invest. :)

It actually comes down to whether you think the markets are efficient in the short run. I used to believe the answer was yes, but after reading many pro and con articles, books, etc. I now think the answer is no. This leads to intermittent value opportunities from "Mr. Market".

Anyway, I still do believe the market is efficient in the long run.
Title: Re: Facebook IPO
Post by: Mr Mark on May 22, 2012, 04:34:17 PM


I actually invest exactly like you do, but go ahead and assume away! Just be more careful with your assumptions when you invest. :)

It actually comes down to whether you think the markets are efficient in the short run. I used to believe the answer was yes, but after reading many pro and con articles, books, etc. I now think the answer is no. This leads to intermittent value opportunities from "Mr. Market".

Anyway, I still do believe the market is efficient in the long run.

Fair enough! I'll be careful.

I agree they're inefficient in the short run. But as Arebelspy pointed out, the market can usually stay irrational longer than I can stay solvent.
Title: Re: Facebook IPO
Post by: cosmie on May 22, 2012, 05:57:21 PM
As someone whom works with online advertising, I would vehemently stay away from Facebook. The only method Facebook has for generating revenue is advertising. This strategy is similar to revenue streams of other online giants such as Google, Microsoft adCenter (which now powers Yahoo ads), and LinkedIn. It differs, though, in the fact that Facebook advertising doesn't work; advertisers see almost no return on ad spend through Facebook. To understand why, you have to look at the audiences of each service:

Google: People are searching. People are actively looking for something. By targeting ads skillfully, an advertiser can place their product in front of a consumer right when they're in a stage to purchase that product. This results in ad spend converting into a sale. Google also has the display network, which is when website owners embed ads into their website (such as what you see here at MMM). These ads are notorious for having a much lower rate of return. Why? Because when people are on a website they're seeing unsolicited ads that need to be pretty damned convincing to entice a user away from what they're doing (which usually isn't looking for something). Display advertising is more popular for branding purposes, and a large ROI simply isn't expected. Google makes it's $35 billion annual ad revenue by researching when is the  best time and place to insert an ad for it to work.

Microsoft adCenter: Same premise as Google, just a much lower market share than Google.

LinkedIn: Users utilize LinkedIn to connect and recruit, not socialize. Users connect for the purpose of marketing themselves to keep relevant with their corporate/business contacts, and recruiters go through contacts to find the most qualified job candidates. Certain products do very, very well when advertised on LinkedIn. Educational opportunities, certification programs, seminars, conferences, anything related to employee improvement will actively engage LinkedIn users and result in a return for the advertisers. The detailed information posted to LinkedIn is utilized for specialized ad targeting (by position, company, job experience, education level, location, previous locations, certifications, etc). This is also not a sole source of revenue for LinkedIn; they also sell premium services.

Facebook: Users utilize Facebook to socialize with personal contacts. They do this via posts, games, etc. However, in no way, shape, nor form are users looking for products or services when on Facebook (besides the next best Zynga game, I guess). As such, Facebook advertising is only truly useful for branding purposes (i.e. don't expect any returns). Before social media, something such as Google Display advertising was prominently utilized for this. And, even though it's less effective than search advertisements, it still has a determinable and traceable return on ad spend. So you get branding, with a modicum of return to justify the expense. Social media advertising lacks even this modicum of return. Companies have invested heavily in the area, dedicating huge advertising budgets in an effort to not miss out on the potentially lucrative advertising medium. These really expensive experiments are finally mature enough that a lot of companies are reconsidering the value of them. For example, GM recently decided to pull their annual $10 million USD Facebook advertising budget, because it didn't result in any discernible return (link to article (http://www.digitaltrends.com/social-media/gm-pulls-facebook-advertising-amid-growing-concerns-over-social-media-marketing/)).

Facebook's IPO came when it did because the advertising world is finally accumulating enough data to decide at what level to actually invest in social media paid advertising over a long term. As of now, most large companies have approved virtually any budget asked for contemporary advertising streams such as Twitter, LinkedIn, and Facebook. That's because they didn't want to be the one that was left out. However, now is the point where they're asking for data about what they've gotten from that advertising spend, and advertising departments can only say "you can't compare the value of social media with traditional advertising". Because of that, companies have enough information to work with to decide how relevant the "incomparable value" of social media advertising is to their business model. Social media paid advertising is here to stay, but companies are reigning in the budgets to match the true value to the bottom line. Facebook's IPO came right when they saw a shifting in social media paid ad spend so that they didn't wait til the bubble burst. Within the next year or so most major spenders will have defined deliverables from social media spending and will adjust spending to match the results. This will, from personal experience and research, be much lower than has currently been the case; as such, Facebook's monetization projections via paid advertising will have to be reevaluated.
Title: Re: Facebook IPO
Post by: smedleyb on May 24, 2012, 11:15:01 PM
I almost pulled the trigger on some FB around 30 bucks the other day.  But the way this market is trending, a move to $26-28 bucks wouldn't surprise me.  I mean, when your customer base is a billion strong, there's some value there not captured by a simple P/E analysis.  I'm a buyer at the right price.
Title: Re: Facebook IPO
Post by: arebelspy on May 25, 2012, 07:05:39 AM
I almost pulled the trigger on some FB around 30 bucks the other day.  But the way this market is trending, a move to $26-28 bucks wouldn't surprise me.  I mean, when your customer base is a billion strong, there's some value there not captured by a simple P/E analysis.  I'm a buyer at the right price.

Sure, some potential value.  But how is that not gambling, hoping the market agrees with you?
Title: Re: Facebook IPO
Post by: Physics on May 25, 2012, 12:18:56 PM

People also had similar reactions to Apple and Google.  Both are doing fine.  Even if I grant you the examples where the public was wrong, and the investment would've failed, there are other examples where the opposite is true. 


Apple and Google are both trading at Price-to-Earning ratios of 11 to 12.

FB IPO indicated a P/E of 90.
Title: Re: Facebook IPO
Post by: smedleyb on May 25, 2012, 03:08:04 PM
I almost pulled the trigger on some FB around 30 bucks the other day.  But the way this market is trending, a move to $26-28 bucks wouldn't surprise me.  I mean, when your customer base is a billion strong, there's some value there not captured by a simple P/E analysis.  I'm a buyer at the right price.

Sure, some potential value.  But how is that not gambling, hoping the market agrees with you?

I think I get you but not sure.

I'm looking to buy FB for the long-term -- not in size but a little -- and I'm looking to buy it cheaper than it's currently offered.  That to me is sound money management technique which is markedly different than gambling.   
Title: Re: Facebook IPO
Post by: Mr Mark on May 29, 2012, 07:50:12 PM
Update. 1 week after IPO, down 24% and bears raging.

Market timers are doubling down??


http://www.latimes.com/business/la-fi-facebook-shares-20120530,0,258704.story  (http://www.latimes.com/business/la-fi-facebook-shares-20120530,0,258704.story)
Title: Re: Facebook IPO
Post by: smedleyb on May 30, 2012, 07:18:06 AM
This whole Facebook IPO epitomizes what absolutely sucks about Wall Street.  Turns out that as Morgan Stanley was creepin up the bid pre-IPO, somebody in the know was running around telling big institutional clients that numbers at FB (revs, earnings) needed to be taken down.   Which makes the $38 initial price even more ridiculous.  Pure greed by everybody on the street, and a stock that might have more pain over the short term before a price floor is put in place (as the retail clients who bought high turn tail and sell low).   Amazingly, if this stock was priced in the mid to high twenties rather than near 40, I bet the it would be higher than it is today and everybody involved would have a little profit and feel somewhat satisfied. 

Not only is greed good, it's legal.
Title: Re: Facebook IPO
Post by: tooqk4u22 on May 30, 2012, 12:10:11 PM
I watched the FB opening on the news networks - weird how several were running it live! - and kinda laughed at how the hype fell so completely flat. Glad I didn't put any money down. Not to say I won't down the road, it'll be interesting to see how this plays out over the next few months.

Second day of trading and already down 11% to $34 from IPO of $38.
[/quote]

These two responses are related because the initial price discussion was in the $24-28/share range then they kept upping the range as the hype grew - the reality is that they didn't leave any money on the table for the IPO investors as usually customary.
[/quote]

It is inline with the initial estimated trading range, I am sure there will be plenty of lawsuits but who cares because it won't mean a thing to Zuck.
Title: Re: Facebook IPO
Post by: grantmeaname on May 30, 2012, 12:49:49 PM
What would the investors sue over? You can't just decide you're going to sue because you're not happy about something. If engineering a slight increase in the price post-IPO is permitted by securities laws -- leaving "money on the table for the IPO investors as usually customary" -- then what's wrong with engineering a slight decrease in the price post-IPO? They're no different.
Title: Re: Facebook IPO
Post by: strider3700 on May 30, 2012, 01:33:57 PM
The law suits are because facebook realized revenues were going to go down and didn't do a proper disclosure of this info.  They told some giant investors but didn't  announce it to the public.  I'm not certain that they had to announce it to everyone but they definitely can't tell some but not others now that they're public.
Title: Re: Facebook IPO
Post by: tooqk4u22 on May 30, 2012, 01:39:58 PM
The law suits are because facebook realized revenues were going to go down and didn't do a proper disclosure of this info.  They told some giant investors but didn't  announce it to the public.  I'm not certain that they had to announce it to everyone but they definitely can't tell some but not others now that they're public.


Precisely - there appears to be some back room shannigans going on.  The I-banks, facebook, and NASDAQ will likely face some sort of class action suit.
Title: Re: Facebook IPO
Post by: arebelspy on May 30, 2012, 01:46:42 PM
What would the investors sue over? You can't just decide you're going to sue because you're not happy about something.

Of course you can.  I can sue you because I don't like your username.

It'll get thrown out as frivolous, but you can - literally - sue over anything.  You just may not win.

And people actually do sue because they aren't happy about something all the time. 
Title: Re: Facebook IPO
Post by: grantmeaname on May 30, 2012, 01:55:43 PM
The law suits are because facebook realized revenues were going to go down and didn't do a proper disclosure of this info.
The underwriter (Morgan Stanley) and the company itself are both legally prohibited from releasing any revenue information to the public within 40 days of the IPO, called the quiet period (http://en.wikipedia.org/wiki/Initial_public_offering#Quiet_period).

Precisely - there appears to be some back room shannigans going on.
You just said a handful of posts ago that backroom shenanigans are the standard condition of IPOs, and that banks usually don't pinpoint the fair valuation of the company intentionally!

Of course you can.  I can sue you because I don't like your username.
Yes, it's possible. I realize it's possible. My point is that the suit is meaningless unless they're breaking a law, and nobody's said that a law was broken. All people are saying is that they're mad that the price went down.

Title: Re: Facebook IPO
Post by: ErikZ on May 31, 2012, 08:03:06 AM
...I mean, when your customer base is a billion strong...

They're not customers, they're advertising targets. With ad filters.

I didn't buy into the Facebook IPO because I don't see how an IPO would benefit Facebook.
Title: Re: Facebook IPO
Post by: arebelspy on May 31, 2012, 08:49:47 AM
...I mean, when your customer base is a billion strong...

They're not customers

Right.  They're the product.  Their product base is a billion strong (minus shell/multiple accounts, spam accounts, those who have ads blocked, those who never log on, etc.)

Their customers are the companies buying ads.  And, as we've recently learned, mobile has a revenue problem.
Title: Re: Facebook IPO
Post by: smedleyb on May 31, 2012, 11:44:34 AM
...I mean, when your customer base is a billion strong...

They're not customers, they're advertising targets. With ad filters.

I didn't buy into the Facebook IPO because I don't see how an IPO would benefit Facebook.

You don't see how raising billions in capital benefits Facebook? 
Title: Re: Facebook IPO
Post by: rjack on May 31, 2012, 11:53:57 AM
You don't see how raising billions in capital benefits Facebook?

No, not unless they have a excellent plan for how they are going to efficiently deploy all the capital.
Title: Re: Facebook IPO
Post by: smedleyb on May 31, 2012, 11:58:14 AM
You don't see how raising billions in capital benefits Facebook?

No, not unless they have a excellent plan for how they are going to efficiently deploy all the capital.

I'm sure Zuck plans on filling a pool with $100 bills before he lights it on fire.

As far as how FB plans on deploying their capital, can't tell you, I'm not in the boardroom.

As far as FB raising capital through equity issuance, well, that's the whole reason companies sell stock -- to raise capital.  If you don't get that, then, well, you just don't get Wall Street. 
Title: Re: Facebook IPO
Post by: rjack on May 31, 2012, 12:25:19 PM
You don't see how raising billions in capital benefits Facebook?

No, not unless they have a excellent plan for how they are going to efficiently deploy all the capital.

I'm sure Zuck plans on filling a pool with $100 bills before he lights it on fire.

As far as how FB plans on deploying their capital, can't tell you, I'm not in the boardroom.

As far as FB raising capital through equity issuance, well, that's the whole reason companies sell stock -- to raise capital.  If you don't get that, then, well, you just don't get Wall Street.

Well, since I have an MBA from a top ten business school, I think I get the idea of equity issuance. However, none of that will benefit FB and it's shareholders unless they deploy the capital to achieve a high ROI/ROA. If you don't get that, then, well, you just don't get equity investing.
Title: Re: Facebook IPO
Post by: smedleyb on May 31, 2012, 12:39:02 PM
Well, since I have an MBA from a top ten business school, I think I get the idea of equity issuance. However, none of that will benefit FB and it's shareholders unless they deploy the capital to achieve a high ROI/ROA. If you don't get that, then, well, you just don't get equity investing.

Impressive credentials.

Which is why your failure to understand the logic behind the IPO is so mind boggling. 

As far as equity investing goes, I predicted last week a FB share price between 26-28 bucks.  Oh look, FB is around 27.50 as we speak!

Still not buying it, yet.

Title: Re: Facebook IPO
Post by: smedleyb on June 04, 2012, 12:52:44 PM
The slow drip to the low 20's continues...

Couldn't have happened to a crappier IPO, IMO.

The more I hear about the pre-IPO shenanigans the less I want to get near this stock/company.  Like others above pointed out the $38 valuation was rich -- and that was before we head FB was having trouble monetizing mobile.  I was letting my desire to buy and flip FB for a quick buck push me into defending the basic value of a company whose product I don't even use or care to use.   

On the other hand, I'm always on somebody's Twitter page.  Hmmm....

Title: Re: Facebook IPO
Post by: menorman on June 07, 2012, 03:56:09 PM
Well, since I have an MBA from a top ten business school, I think I get the idea of equity issuance. However, none of that will benefit FB and it's shareholders unless they deploy the capital to achieve a high ROI/ROA. If you don't get that, then, well, you just don't get equity investing.

Impressive credentials.

Which is why your failure to understand the logic behind the IPO is so mind boggling. 

As far as equity investing goes, I predicted last week a FB share price between 26-28 bucks.  Oh look, FB is around 27.50 as we speak!

Still not buying it, yet.
The FB couldn't have come at a worse time from a flipper's standpoint. The media had everyone hyped to believe that the FB IPO would be the best thing since the wheel. Then when the IPO happened and it turned out that the wheel actually was quite amazing, the horde of fingers starting pointing to figure out why FB could reinvent the wheel. While sure, there may have been some problems with the IPO itself and people can feel like they were also gypped on the information front, they're all forgetting one crucial thing. FB showed up on the market, which was (and still apparently is) in a downward trend. Therefore, just about everything in the market will go down as well--including FB. So while I agree there were some things before the IPO that appear interesting, I think a major part of the price decline is related to the broader market decline as a whole. At the same time, I can definitely see FB coming into more reasonable pricing territory and a decent entry point for someone waiting for the market to rise again.
Title: Re: Facebook IPO
Post by: KittyWrestler on June 07, 2012, 04:54:16 PM
I am puzzled by the recent Apple partnership with Facebook...
Title: Re: Facebook IPO
Post by: Grigory on June 08, 2012, 01:50:22 AM
The media had everyone hyped to believe that the FB IPO would be the best thing since the wheel.
Yup. To quote Warren Buffett, "be greedy when others are fearful; be fearful when others are greedy." The stampede of CNBC's lemmings told me everything I needed to know.
Title: Re: Facebook IPO
Post by: smedleyb on June 08, 2012, 07:28:40 AM
The media had everyone hyped to believe that the FB IPO would be the best thing since the wheel.
Yup. To quote Warren Buffett, "be greedy when others are fearful; be fearful when others are greedy." The stampede of CNBC's lemmings told me everything I needed to know.

I think we're reaching the other extreme -- extreme fear vs. extreme greed.   Next whoosh lower and I'm a buyer of FB.
Title: Re: Facebook IPO
Post by: arebelspy on June 08, 2012, 07:32:38 AM

I think we're reaching the other extreme -- extreme fear vs. extreme greed.   Next whoosh lower and I'm a buyer of FB.

So tell me - what's your strike price, and how did you reach that number?
Title: Re: Facebook IPO
Post by: smedleyb on June 08, 2012, 08:14:56 AM

I think we're reaching the other extreme -- extreme fear vs. extreme greed.   Next whoosh lower and I'm a buyer of FB.

So tell me - what's your strike price, and how did you reach that number?

Strike price is low 20's and I reached it by:

(a) recognizing the hype of the IPO and not wanting any part of it;

(b) recognizing the present day universal disgust for the stock and seeing an opportunity to buy it.

(c) recognizing the strong fundamentals (growth rate) behind social media.

(d) recognizing the stock is selling off within a generally weak market, which may weaken further to the tune on another 5-10%.  In that scenario I doubt FB bucks the downward trend (it hasn't so far).

For me, markets are 90% psychology and about 10% fundamentals.  The idea that markets can't be predicted is akin to the idea that human behavior can't be predicted.  If that were the case, psychology and sociology would be worthless disciplines, which they clearly are not.  It's all about probabilities and money management, and the risk reward is a heck of a lot better in the low 20's.   Doesn't mean I'll even get the opportunity as the stock seems to be attempting to put a bottom in around here and may rally a bit, especially if it can power through $27.50. 

Just tying to be opportunistic. 
Title: Re: Facebook IPO
Post by: arebelspy on June 08, 2012, 09:30:55 AM
What is "low 20s"?  And why do you feel FB's proper valuation is there, as opposed to "high teens" or "mid 20s"?
Title: Re: Facebook IPO
Post by: smedleyb on June 08, 2012, 11:21:39 AM
What is "low 20s"?  And why do you feel FB's proper valuation is there, as opposed to "high teens" or "mid 20s"?

"Proper valuation" is a mythical concept.  Markets are inefficient mechanisms.  The Soros article linked above explains why.

Title: Re: Facebook IPO
Post by: grantmeaname on June 08, 2012, 11:33:59 AM
The Soros article must have been linked in another thread, I don't see it. Why do you think markets are inefficient?
Title: Re: Facebook IPO
Post by: smedleyb on June 08, 2012, 11:57:28 AM
The Soros article must have been linked in another thread, I don't see it. Why do you think markets are inefficient?

Markets are driven by buyers and sellers, both of whom have incomplete information and are driven by the emotions of fear and greed.  In that interplay of emotion and partial knowledge one can exploit advantageous risk/rewark opportunities.
Title: Re: Facebook IPO
Post by: arebelspy on June 08, 2012, 07:11:28 PM
You still didn't answer this easy one: What is "low 20s"?

But okay, let's play a fun semantics game!

Let's redefine proper valuation from whatever you think it is to: the price point that it's worth, including the fact that everyone has incomplete information and are driven by emotions.

Now that we have that cute definition...

Why do you feel FB's proper valuation (under our new definition) is low 20s, as opposed to "high teens" or "mid 20s"?
Title: Re: Facebook IPO
Post by: smedleyb on June 08, 2012, 07:55:54 PM
What is low 20's?   I don't know, $23.67?  Maybe $22.44?  Does $24.98 fit the bill?  I didn't realize your question required such painstaking detail.

Let's play another game, called "stop being coy and just say what you want to say."  I've given you my price targets (which have proved accurate so far), I've explained why I'm warming up to FB a couple posts above, yet you keep fishing for something.  Get it off your chest, man. 

And enough with "proper valuation."  I don't even know what that means, frankly. 
Title: Re: Facebook IPO
Post by: arebelspy on June 08, 2012, 08:44:39 PM
I don't have anything to say, I'm trying to understand your thought process and where you're coming from.

You apparently are getting hung up on the terminology of "proper valuation" when I don't mean anything by it, but it's apparently a loaded term for you.

How about "the right price"?  Is that an acceptable phrase?

So substitute that in.  Why is 23.67 the right price for you, and not high teens or mid 20s?
Title: Re: Facebook IPO
Post by: smedleyb on June 09, 2012, 10:16:50 PM
I don't have anything to say, I'm trying to understand your thought process and where you're coming from.

You apparently are getting hung up on the terminology of "proper valuation" when I don't mean anything by it, but it's apparently a loaded term for you.

How about "the right price"?  Is that an acceptable phrase?

So substitute that in.  Why is 23.67 the right price for you, and not high teens or mid 20s?

Au contraire,  I believe you do have something to day; and I think it's you getting "hung up" on this notion of proper valuation -- but I wont belabor these points because they're inconsequential to the task at hand, namely, getting paid to buy FB. 

FB hit a high of $45 on it's first day of trading.  50% off of $45 = $22.50.  Stocks tend to bounce when they drop 50% from their highs, especially stocks of companies where the fundamentals behind the company are strong, i.e., social media is one of the hottest growth sectors in the economy.  Since I'm impatient I would probably pull the trigger on half the shares I wanted to buy as the stock cracks below $25, and the remaining half around or near $22.50.   That's my strategy if/when these price levels come into play.  Mind you, I reserve the right to change my mind as new information becomes available, which is bound to happen given the chaos and uncertainty in Europe.

Another level I watch is 33% down, which was around $30.  But given that I saw the general markets acting heavy, I thought it best -- from a risk/reward perspective -- to wait until 50% down.

But I can hear you now: "well, why 50%, why not 55%, or 45%?"  And so it goes, ad infinitum






Title: Re: Facebook IPO
Post by: arebelspy on June 09, 2012, 11:17:34 PM
Makes sense, thanks for the explanation.
Title: Re: Facebook IPO
Post by: smedleyb on June 11, 2012, 02:50:07 PM
FB was rejected again at the important 27.50 level and managed to close below the opening price, leaving what we call in technical analysis a "tail" on it's daily chart.  The fact that it held above Friday's low is a positive but I can't help but think there's another move lower before the stock can stage a rally for more than a couple days.

If last week's low of 25.5 is violated I think a quick move to that 22.50 level is in short order; if the negativity surrounding the stock (everybody hates FB, which is a far cry from a month ago when it was the media darling) increases as well, I think we'll get our first solid buying opportunity which could yield 10-30% in short order.

Hedge-funder Jim Cramer likes what he calls "3 points up, 1 point down" situations.  I think FB at $23 is a stock that could fall to $20-21, but could easily rise to $28-31 over the coming months.  That's a solid risk reward, IMO.

My goal is to commit a small amount of capital (5% of my trading account) to FB if/when my buy parameters are met, if I do anything at all.   
Title: Re: Facebook IPO
Post by: arebelspy on June 11, 2012, 08:17:00 PM
I think the Apple partnership (announced today) will help them bounce back, though it may take a bit (implementation will be in iOS 6, which is scheduled for the fall, so 3-5 months).
Title: Re: Facebook IPO
Post by: sol on June 11, 2012, 09:57:01 PM
FB hit a high of $45 on it's first day of trading.  50% off of $45 = $22.50.  Stocks tend to bounce when they drop 50% from their highs, especially stocks of companies where the fundamentals behind the company are strong

Silly me, I thought company valuations were entirely about fundamentals.  Do you think FB is a good buy at a price to earnings ratio of 75?  50?

What's the implied P/E in your target price of $22.50/share?  Does it compare well with the rest of the market right now?
Title: Re: Facebook IPO
Post by: smedleyb on June 12, 2012, 04:16:04 AM
FB hit a high of $45 on it's first day of trading.  50% off of $45 = $22.50.  Stocks tend to bounce when they drop 50% from their highs, especially stocks of companies where the fundamentals behind the company are strong

Silly me, I thought company valuations were entirely about fundamentals.  Do you think FB is a good buy at a price to earnings ratio of 75?  50?

What's the implied P/E in your target price of $22.50/share?  Does it compare well with the rest of the market right now?

What you think and what actually drives stock prices are two different things.

Personally I've always made the most money dabbling in high P/E stocks, which come in two forms:  some stocks with high P/E's are growing rapidly and can "grow into" their earnings valuations.  A company growing it's earnings at 100% a year will see it's profits rise 3200% over a 5 year span.  A stock with a P/E of 100 growing earnings at 100% would technically have a P/E of 3.3 in 5 years.  Thus, many analysts look at what is known as the PEG ratio, or price to earnings divided by growth rate.   In the example I'm using, the company would have a PEG of 1.  Whereas a blue chip with a P/E of 14 that's growing at 7% would have a PEG of 2 and would be considered "twice as expensive" than the former. 

The other form are cyclical companies which simply have no P/E (since there is no E to speak of), or a sky high one, because profits are way down due to short term economic conditions.  On the flip side, the time to sell is when these cyclical companies have their lowest P/E (suggesting the economic cycle is peaking).  In other words, relying strictly on P/E to gauge when to buy or sell these stocks will have you buying at the top and selling at the bottom.

And this is before we get into the fact that there is so much else that moves stocks -- macroeconomic conditions, emotional trading based on fear/greed, and -- this might be the most controversial -- "technical analysis," or the interpretation of charts in the quest to determine a stock's future behavior. 
Title: Re: Facebook IPO
Post by: unitsinc on June 12, 2012, 07:14:36 AM
Just from my very basic reading on the topic of fundamental vs. technical analysis, I've gotta guess that the answer lies somewhere in the middle.

I saw you(smedley) claim 90/10 for emotional based. I've seen other people claim just the opposite. Both present really good arguments, and I think both are right at different times. The trick is just figuring out when to use each premise.
Title: Re: Facebook IPO
Post by: smedleyb on June 26, 2012, 07:44:18 PM
Since Arabelspy has found it necessary to attack me in another thread regarding the "nonsensical" things I've been saying about FB, I think it's necessary to recap my remarks:

On May 6, two weeks before the IPO, I said the following:

Social media will be one of the hottest growth areas over the next decade.  I want to own it,  just not sure where the proper entry point is.

I'll say this, companies like FB or LNKD will be high on my buy list when this cyclical bull runs it's course and stocks come for sale.  Could be 2 weeks from now, could be 2 years from now.   


To reiterate:  I think social media is gonna be huge, but I had no desire to buy FB at it's IPO price.  I was waiting for cheaper prices.

On May 24, I said the following:

I almost pulled the trigger on some FB around 30 bucks the other day.  But the way this market is trending, a move to $26-28 bucks wouldn't surprise me.  I mean, when your customer base is a billion strong, there's some value there not captured by a simple P/E analysis.  I'm a buyer at the right price.

Context:  after hitting a high of 45 on its opening day, FB began a viscous sell off which brought it to 31 on it's third day of trading.  Like I said in my post, I thought FB and the market had more downside, which happened to be speculative and true -- FB bottomed soon after at around $25.50, and spent a couple weeks trading between $26-28.  The market itself experienced a 4-5% decline over this period, too.

Around this time Arabelspy started "engaging" my comments, which lead to the following post on June 08:

Strike price [to buy FB] is low 20's and I reached it by:

(a) recognizing the hype of the IPO and not wanting any part of it;

(b) recognizing the present day universal disgust for the stock and seeing an opportunity to buy it.

(c) recognizing the strong fundamentals (growth rate) behind social media.

(d) recognizing the stock is selling off within a generally weak market, which may weaken further to the tune on another 5-10%.  In that scenario I doubt FB bucks the downward trend (it hasn't so far).

For me, markets are 90% psychology and about 10% fundamentals.  The idea that markets can't be predicted is akin to the idea that human behavior can't be predicted.  If that were the case, psychology and sociology would be worthless disciplines, which they clearly are not.  It's all about probabilities and money management, and the risk reward is a heck of a lot better in the low 20's.  Doesn't mean I'll even get the opportunity as the stock seems to be attempting to put a bottom in around here and may rally a bit, especially if it can power through $27.50. 

Just tying to be opportunistic. 


On that day, June 08, FB closed at a little over $27.  Over the next several sessions it traded around this important $27.50 level, and finally closed above it 4 sessions later on June 14 ($28.30).  The stock has since rallied 20% since.  No, I never bought it -- my price target (23-25) was never reached.  I simply offer this recap to counter the moderator's claim in another thread that I'm spewing "nonsense."  On the contrary, I think I bring a interesting perspective to the table and wish to be judged my actual statements, nothing more.

Your move, Mod.
Title: Re: Facebook IPO
Post by: skyrefuge on June 26, 2012, 08:09:35 PM
Since Arabelspy has found it necessary to attack me in another thread regarding the "nonsensical" things I've been saying about FB

heh...I've half-heartedly wanted to come over here to post a little cherry-picked schadenfreude for the last week, but figured that would just be mean.  But now that arebelspy started it, I'm happy to pile on.  :-)  My angle was going to be slightly different though:

Quote from: smedleyb
I think we'll get our first solid buying opportunity which could yield 10-30% in short order.

...and you were right, we did, but your tarot-card-reading was a bit off, so you missed it!  haw haw.
Title: Re: Facebook IPO
Post by: smedleyb on June 26, 2012, 08:21:29 PM
Since Arabelspy has found it necessary to attack me in another thread regarding the "nonsensical" things I've been saying about FB

heh...I've half-heartedly wanted to come over here to post a little cherry-picked schadenfreude for the last week, but figured that would just be mean.  But now that arebelspy started it, I'm happy to pile on.  :-)  My angle was going to be slightly different though:

Quote from: smedleyb
I think we'll get our first solid buying opportunity which could yield 10-30% in short order.

...and you were right, we did, but your tarot-card-reading was a bit off, so you missed it!  haw haw.

No great shakes.  I was long the market via Sept. SPY calls.  Made a little coin. 

Title: Re: Facebook IPO
Post by: arebelspy on June 26, 2012, 09:40:32 PM
On the contrary, I think I bring a interesting perspective to the table and wish to be judged my actual statements, nothing more.

I agree with both of these.

Your move, Mod.

You say this like it's relevant to anything.  Me as a mod means I delete spam.  That's it.  My opinions are 100% my own.
Title: Re: Facebook IPO
Post by: smedleyb on June 26, 2012, 10:12:11 PM
On the contrary, I think I bring a interesting perspective to the table and wish to be judged my actual statements, nothing more.

I agree with both of these.

Your move, Mod.

You say this like it's relevant to anything.  Me as a mod means I delete spam.  That's it.  My opinions are 100% my own.

Again, let's focus on the argument and not the arguer.

As you said in the TEF thread:

Yeah, your quote is from the same person spouting nonsense about the Facebook IPO, who was thinking of pulling the trigger around 30, then revised to low 20s when it kept dropping.

His investment style appears akin to gambling.  Specifically betting on the longshot ponies that are "due."


I made an effort to compress my thoughts into a coherent narrative.  In what way am I spouting off nonsense?  In what way am I a gambler?  What differentiates a gambler from a speculator?  If markets are always efficient and random, why does Buffett or Tudor-Jones or Soros kick so much ass?  Or the thousands of anonymous traders who walk away with tens of millions because their "feel" for the market proved uncannily prescient?

I think a real dialogue would benefit all in this forum.  Save the lame insults for another site. 

Title: Re: Facebook IPO
Post by: arebelspy on June 27, 2012, 07:30:55 AM
Based on your last few posts in both this thread and the other one, I don't think dialogue would be productive.  I had enjoyed your posts until you went off.  You have to understand that with views like yours (which you yourself call an "interesting perspective"), you'll get some push back.  If you're too thin skinned to handle that, it'll be tough for you.

If you want to call yourself a speculator rather than a gambler, I won't quibble over that.
Title: Re: Facebook IPO
Post by: smedleyb on June 27, 2012, 07:36:19 AM
Based on your last few posts in both this thread and the other one, I don't think dialogue would be productive.  I had enjoyed your posts until you went off.  You have to understand that with views like yours (which you yourself call an "interesting perspective"), you'll get some push back.  If you're too thin skinned to handle that, it'll be tough for you.

If you want to call yourself a speculator rather than a gambler, I won't quibble over that.

I see.  Impugn my character, call my comments nonsense, then paint me as the irrational one after I spend a little time outlining my thoughts in way that's clear and concise, albeit with a sprinkle of profanity.

 

Title: Re: Facebook IPO
Post by: arebelspy on June 27, 2012, 07:58:09 AM
I've said nothing about your character, except that maybe you're a  bit thin-skinned.  The irrational posts were the ones where you flew off the handle in multiple posts.  Or, as Mark called it, got a bit "touchy."

That aside, if you want to actually discuss the topic and can avoid getting so slighted and angry, here's my thoughts:

Of your guesses, you almost bought FB at 30.. luckily didn't.  You then said you'd pull the trigger at low 20s.  It never hit that.

I asked why low 20s was your strike point, rather than mid 20s, etc., and you couldn't articulate a reason, but wanted to quibble over the term "value".  If you had been confident about that 27.50 resistance point, and bought, you'd have a 20% gain, and I'd say hey, at least he got one prediction right.  But so far we have two wrong on Facebook, and 3 wrong on Spanish stocks.  It's hard to take predictions seriously when they keep being wrong (but vague enough that you will try to claim them right enough).

To specifically address your questions:

Quote
In what way am I a gambler?

You are a gambler because you are guessing.  You're hoping you're right, and you're trying to time investments to make money, not based on what the value of the item is (which you seem to think cannot be known), but based on other traits like "I feel like there's panic, so I should buy."

Quote
What differentiates a gambler from a speculator?

Probably not much.  I won't quibble over these terms, and if you want to be called a speculator, that's fine with me.

Quote
If markets are always efficient and random, why does Buffett or Tudor-Jones or Soros kick so much ass?

They aren't always efficient or random.  That being said, equating what you do to how Buffet invests is laughable.  He certainly looks at value.  He doesn't buy planning to sell anytime soon, his time frame is almost always decades (at a minimum).  He's buy and hold.

Can stuff be undervalued?  Certainly. 

Quote
Or the thousands of anonymous traders who walk away with tens of millions because their "feel" for the market proved uncannily prescient?

There's many millions more who lost tons in the market.  I'd say the number of traders who we don't know about (anonymous) and walked away (did not go back and speculate more and lose it all) and made tens of millions is vanishingly small.  You could probably count them on one hand.  Not the "thousands" you claim. 
Title: Re: Facebook IPO
Post by: smedleyb on June 27, 2012, 08:16:08 AM
Many things move stocks.  The fundamentals of the company (profits, management), the psychology of investors (the duality of fear/greed), macro-economic forces (Fed turning on liquidity spigot), and "technical analysis."  Much of what Arebelspy refers to in my statements as "guessing" or "gambling" is the way in which my mental process assimilates all these variables to form an investment outlook; that outlook can be long term, it can be a matter of hours.  But my thoughts rely heavily on technical analysis when making a move -- for some, this is just a kind of weird numerology or hocus pocus investing.  For others -- Soros, Tudor-Jones, Paul O'Neil, it can be a useful tool in locating advantageous risk/reward opportunities.

Gamblers blow everything they go on long shots; speculators bet a percentage of their capital on the direction of markets --  be it Spanish stocks or real estate in Southern Nevada.  The smart speculators use sound money-management techniques (never put all your eggs in one basket; cut losses quickly); the dumb ones go all in and get blow out by the slightest market reaction.

Every time we buy any asset we hope will appreciate, we are speculating.  Especially when it comes to stocks.
Title: Re: Facebook IPO
Post by: grantmeaname on June 27, 2012, 08:37:14 AM
By buying a houses in southern Nevada with mortgages, you are: That is not equivalent to declaring that Telefonica is undervalued because your Spidey sense tingles or your chart tells you it's a buy.
Title: Re: Facebook IPO
Post by: smedleyb on June 27, 2012, 08:48:47 AM
By buying a houses in southern Nevada with mortgages, you are:
  • taking advantage of historically low interest rates that are locked in for 30 years;
  • participating in a market that overwhelmingly favors the homeowner and the landlord over the tenant;
  • taking advantage of tax incentives designed to encourage home ownership to further cheapen the mortgages;
  • as a landlord and maintenance person, providing a valuable service for which there is a strong and consistent demand; and
  • owning, at least in part, a tangible physical property with significant legal protections for the mortgage holder
That is not equivalent to declaring that Telefonica is undervalued because your Spidey sense tingles or your chart tells you it's a buy.

Again, how long have you been investing in the stock market?

I bet you don't even own any stocks.  Am I wrong?
Title: Re: Facebook IPO
Post by: grantmeaname on June 27, 2012, 08:59:23 AM
You got me, I'm younger than you. I never considered it that way, and let me tell you, my feelings are just, like, way hurt right now.
Let's move on and address the actual arguments I've made in three separate threads that are currently sitting begging a response, shall we?
Title: Re: Facebook IPO
Post by: smedleyb on June 27, 2012, 09:11:30 AM
You got me, I'm younger than you. I never considered it that way, and let me tell you, my feelings are just, like, way hurt right now.
Let's move on and address the actual arguments I've made in three separate threads that are currently sitting begging a response, shall we?

Respond to what?  Your narrow conception of the world of stocks where nobody knows shit and where we should thus just blindly invest all our money in mutual funds so these hack managers can milk their 2-3% every year while everyone's IRA's stagnate if not fall behind do due to corrosive effects of inflation?

Again, you speak with such authority on these matters that one would suspect some "engagement" in the markets.  I put my money where my mouth is every day; I try my best, read and study as much as possible, and look to manage my risk.   I gave a play by play on how I approached trading FB, which proved remarkably accurate -- dumb luck, righ? -- in order to bring another dimension to the question: is FB a buy?

All I get from you or Arabespy are lame meta-market statements how nothing is knowable and we're all just dancing in the dark when it comes to stock speculation.  In Japan, folks have been investing their hard earned money in Nikkei index funds for more than two decades, and they got nothing to show for it but losses.  Before you tell everyone to dump all their money in the market -- especially into our market which is being jacked up by trillions in artificial stimulus -- you better know what you're talking about.

Title: Re: Facebook IPO
Post by: grantmeaname on June 27, 2012, 09:21:03 AM
Again, you offer vague criticisms that I know nothing about what I'm talking about without actually challenging any of my arguments. My authority comes from confidence that I'm right based on factual evidence.

I think Mr Mark, Skyrefuge, and Arebelspy would agree with me that your characterization of your FB predictions as uncannily accurate is a little bit generous. I didn't criticize your Facebook prediction, though, I criticized your Telefonica prediction. You know, the wrong one.

And while we're at it, it's not just your own statements you're mischaracterizing. The argument I'm advancing is that markets are efficient, which means that the value of stocks corrects based on public knowledge about them. In almost 400 posts on this site I have never suggested that people should invest blindly, that nobody knows shit, that anyone has any business investing in actively managed funds, or that anyone under any circumstances should put their retirement savings in anything with an expense ratio higher than .8%, much less an astronomical 3%.

Moreover, if the very best managers in the business, charging 3% expense ratios, can't consistently produce results better than the market movements as a whole, which you're arguing by calling them hacks, then why the hell do you think you can? You just happen to be so fucking smart that the laws of finance that bind the "hack" geniuses who run mutual funds for a living don't apply to you? Give me a break.
Title: Re: Facebook IPO
Post by: arebelspy on June 27, 2012, 09:37:58 AM
Many things move stocks.  The fundamentals of the company (profits, management), the psychology of investors (the duality of fear/greed), macro-economic forces (Fed turning on liquidity spigot), and "technical analysis."  Much of what Arebelspy refers to in my statements as "guessing" or "gambling" is the way in which my mental process assimilates all these variables to form an investment outlook; that outlook can be long term, it can be a matter of hours.  But my thoughts rely heavily on technical analysis when making a move -- for some, this is just a kind of weird numerology or hocus pocus investing.  For others -- Soros, Tudor-Jones, Paul O'Neil, it can be a useful tool in locating advantageous risk/reward opportunities.

Gamblers blow everything they go on long shots; speculators bet a percentage of their capital on the direction of markets --  be it Spanish stocks or real estate in Southern Nevada.  The smart speculators use sound money-management techniques (never put all your eggs in one basket; cut losses quickly); the dumb ones go all in and get blow out by the slightest market reaction.

Every time we buy any asset we hope will appreciate, we are speculating.  Especially when it comes to stocks.

I basically agree with this whole post.

And would add that said speculation has lost speculators many, many, many more dollars than it has made them.

So advising it to people is sketchy at best, if not downright disingenuous and misleading.
Title: Re: Facebook IPO
Post by: arebelspy on June 27, 2012, 09:44:12 AM
All I get from you or Arabespy are lame meta-market statements how nothing is knowable and we're all just dancing in the dark when it comes to stock speculation. 

I don't think either of us have said that. Nor do I think either of us believe it. But it does make a nice strawman.

If you're doing some technical analysis, fine.  I may not agree with that methodology as a whole (even though I do think there is some practical uses for it). If you randomly post on message boards that a Spanish telco is a buy because "there's blood in the streets" with no actual analysis but just a feeling... Well then yes, we'd say that is not knowledge.

And even if it shot up 100% over the next 3 months, I wouldn't say you had knowledge, jut that you happened to be right on that one.

Prove it consistently over time. Start a thread, and post your trades. Not vague "I'd consider buying at low 20s" but actual trades. Make us believers.

Maybe you can actually do it consistently (which some can, but 97%+ lose).
Title: Re: Facebook IPO
Post by: arebelspy on June 27, 2012, 11:19:27 AM
In the other threads referenced in this thread, others have pointed out that we are unlikely to agree and the negativity is just causing harm.

My apologies for any negativity on my part.

We aren't really making progress, just causing ill will.

I'm going to lock up these threads. Anyone wishing to discuss further can use PMs. Any objections, PM me.

Cheers all!