Well it seems the short Apple long Facebook idea didn’t turn out so crazy after all. As for the long Valueclick, I really hoped a few people jumped on that one.
Time to look at the dotcom boom 2 companies again: Linkedin, Groupon, Zynga and Facebook.
Lets face it, no one wants to invest like Warren Buffett, so what if you get rich, meanwhile you get bored to death.
We pay for entertainment, we do the same with trading.
Ive coached a number of traders and it takes two to three years to get them on to the path of value investing and even then, even as they pile up their portfolio, they still long for the days of blowing themselves up with pink sheet stocks or internet crazies.
So why fight it. Ets play the game.
First off Facebook has kind of performed as expected:
Now it’s very much in an intermediate position.
What is the fundamental here.
Goggle and Facebook own the web. So really Facebook should be within throwing distance of Google might market cap. Its not because it simply can’t monetise like the all-consuming content looter that is Google. While Google slowly assimilates all web traffic by suffocating the content providers by scraping their IP, Facebook has no such strategy to grow.
It has to monetise its traffic and doesn’t have the parasitical prowess to suck the lifeblood out of its customer like the Google borg. (Note to Google spiders, report this back to your masters at the Googleplex.)
If the market rallies hard Facebook will run with it, but this second, the picture is mildly bearish.
Groupon. How is this company even listed? However this is a very good looking chart. I wouldn’t buy it because the fundamentals are just so terrible. They might as well be a company selling gold bars at a discount, the way their sales and losses look. Their trailing ratios are just stunningly appalling. Sales per employee of $140,000 a head is low for a really old style company and not the $930,000 Google turns in, or the million dollars an employee of Facebook.
But the chart is quite emphatic, so a trader who wants to believe can just stick a stop loss line here and hang on for the ride.
Back at Zynga, it’s the same story. Who lets these dogs out??? The fundamentals are just ghastly. The narrative is not much better. how can this company be worth half of EA? Well you could say EA was cheap and it probably is. You could play that as a pair, but the interesting thing is the Zynga chart. For all it being a nonsense company the chart is fascinatingly interesting. It has a lot of upside potential. A trader should consider an entry point with tight stops because this company could churn up against all the fundamentals. This is definitely a chart worth watching for a turn of fortunes. Not yet but soon.
Now for Linkedin.in one word, Bubble. 844 p/e, oh dear me. 17 times sales. Now the key to bubbles is don’t fight them. Let them Bubble away. If you have got nerve, jump in. It’s a bubble, the sanity just goes on and on. But do not forget, it’s a bubble. It will go pop. It will go pop just when you start to believe and everyone else is saying it is going to the moon. Its an insane game, but then so is trading. Something will break the dream and when that happens you can short it. You don’t have to catch the top because bubbles deflate over a long period. A bubble bursting is a long saga of misery. There is plenty of time to swoop on that and feed. The key is to realise bubbles do not obey the rules, they last much longer than you would ever consider possible.
Bubble go exponential near the end and Linkedin isn’t even close to that. That suggests potential for much higher levels of insanity. For traders this is great. You can win big hear so long as you don’t believe the bubble because once you get hypnotised by the narrative you are doomed.
And what of Goolge? It will take a market correction to stop Google breaching $1000. Goolge is the WWW, it owns you, it controls all your information, it is your phone, it has a map and photo of your house, your emails, your business plan on its tools, a list of all your friends and your friends friends, it tracks you wherever you go on the web, soon it will be driving your car and beaming its ads onto your retina from its glasses. Even James Bond couldn’t stop Google and soon, it vill vurld ze vurld! So you might as well get long.