I don’t write much about specific stocks because the subject is fraught. I do write about certain stocks when I think their valuations are mad and waty to high and sometimes they go down and sometimes the stay mad and get madder.
Occasionally I talk about stocks and then its one’s I have bought because I think it is cheap. I’m a value investor, I don’t do momentum which is why I rail against the superstar stocks with their divide by zero valuations. However if I smell cheap I can rarely resist.
My main point against superstar stocks is just to say to investors don’t own too much of these companies, keep yourself diversified. Diversification is a rare thing amongst many investors and having all your capital in a Apple or Tesla can be both heaven and hell. Historically undiversified holders of glory stocks end up in the inferno but diversification is the way to go to protect yourself from ending up making a trip over the stock markets equivalent of the river Styx.
However of the few stock I mention as buying, three have been taken over.
They are:
Opentable and Conversant. 24 June 2014
And now:
Orbitz. 15th September 2014
Three in a row is almost weird.
Its not as if there is a general stock market takeover mania in the air.
However there is internet takeover mania out there and it is not just the number of deals going down but also the scale of them, especially of private companies.
Whatsap for example has redefined valuations or for many made the whole process seem mad. Before that it was Instagram, but it is not just Facebook lighting up the world of M&A.
Valuations for companies like Uber have poured gasoline on to the fire too.
The takeaway from my run of blind luck/internet guru foresight is:
Buy cheap listed internet companies with good sales and a nice brand and they will likely get bought.
The market dynamic for internet companies is death or glory. A company is either a red hot darling driven by pure investor momentum or a normal company with a normal valuation. There is a big divide.
The financial payoff for suddenly becoming valued like a Tesla is massive and one way to try to get there it is to buy up rivals.
So the key to this strategy is to find a second division player and buy into its stock and simply wait for a predator to snap it up.
So I’m off to do just that and I’ll get back to you with what I find.
The chances of me getting four in a row is surely low, so get out thereyourself and try and find your own, there must be others.