Young Gun

Could The Facebook Lockup Be Overrated?

Facebook came public some time ago, for those of you unaware of the results, they were completely catastrophic for those who purchased the stock. Many of the retail investors and money managers saw potential in this iconic name, and many still do. It turns out the pop in the stock many expected never occurred, last time I checked Facebook stock has not even returned to its IPO price of $38. Those that initially hated on the metrics (everyone on twitter) of this new technology company have been thoroughly vindicated. With the stock losing almost half of its value over the past months, the dynamics of the Facebook situation have changed. The lockup date sits on the horizon. The wonderful thing about financial markets is that the correlations everyone lives by change over night, in turn making the negative expectations of the lockup date possibly not so negative.

I think the strongest case for the Facebook lockup being overrated lies with the current price point of the stock. Initially many bought Facebook for the story rather than the metrics. Obviously this was a rich stock and still is so. Today, the story is still as tempting with metrics that are significantly better. Facebook is now leaps and bounds cheaper but still encompasses the same great story of growth and potential earnings.  As we have seen with iconic companies like Apple, a little vision and revolutionary idea can make investors a mint. Many investors bought Facebook for the long-term, now they can buy Facebook during the sale of a lifetime. Initially when the company went public the investing community believed that Facebook would blow through $38 and never see it again and everyone must be in . That obviously did not happen. Many institutions and funds alike still see potential with the story, and see a $20 price point as a steal. The price of the stock says everything about the company, for those that want in it looks cheap, for those that want out it is to cheap as well.

What bothers me when I hear about lockup dates, is not the negativity that surrounds them, rather the lack of analysis that investors put forth when it comes to that significant date. We all say the catastrophic repercussions of the lockup when it came to both Fusion-io and Zynga. Those are mere examples, the list goes on and on, but the fact remains that those companies were not on the same playing field as Facebook. These pros analyzing Facebook fail to realize the sheer net worth many have in Facebook. Not only that, but the growth and potential those same individuals see in the company. Why do these individuals believe in the company? They have been involved since the beginning or prior to the IPO date, they have seen the growth, and they see the potential. These same folks have also had a million opportunities to walk away. Let me put it in lamen’s terms, if your investment property lost half its value, would you sell or wait for prices to stabilize? We have seen Facebook over the course of a few months, many of these individuals have been involved for years. Obviously their time horizon is different than those who thought they were going to flip Facebook on the first day and make a killing.

One of the biggest questions many investors are asking themselves, is are the big players going to come out and pay? The big guys are coming and buying at the discount of a lifetime. We have seen Facebook fall from grace bringing all of the social media tyrants with it. We have also seen many institutions lose their lunch and other institutions not even play with the IPO of the decade. Their is still money out to play the social media game. People not in the game do want in, because the story is not only captivating but has the potential to monetize the mobile market to death. Last time I checked almost every mobile device has Facebook on it. All the current Facebook investors knew that the lockup was coming, many are riding out the storm, and that is why the dramatic selling prior to the lockup has not occurred.

For a multitude of reasons I see many investors not selling out when the lockup date comes around. Many of these investors are true investors and are in it for the long haul. They also see the potential of this giant. Though it may take some time for Facebook to work out its kinks, it will. My fear is that the Facebook short seems like the easy trade coming into the lockup. I have learned the hard way that the easy trade is never the right one. When everyone thinks they know the right move in the market, it is usually not the right move. When everyone from your barber to your mother thinks the stock will double on the first day of trading, it wont. The harder trade is always the right one.

Photo by Casey Serin

Posted on by Young Gun in Uncategorized Comments Off on Could The Facebook Lockup Be Overrated?

Investing Lessons To Be Learned From Buying A Car

Over the past week or two I have been diligently searching for a car to match all my innate desires. During the time-consuming process of deciding where to put my hard-earned money, I came to the conclusion that both investing and purchasing a used luxury sedan have many similarities. Many of us have bought vehicles over our lifetimes and the likeness between trading and purchasing a vehicle can lend itself to improve your investing ability. For those of you unseasoned in the arena of car buying this article may also serve as a means to improve your car buying ability ensuring you are not stuck with a lemon in the future.

When one sets out to purchase a vehicle they are often caught up in the moment. The excitement of buying a new car (or pre-owned) is unquestionably extremely exciting. In particular, when you have worked long hours to make funds available to purchase your dream car, the pressure to purchase immediately overwhelms the buyer. Many people fail to realize that they should go into car purchasing the same way in which you came into the funds that allowed you to make the purchase patiently. Patience is a virtue or however that outdated saying goes. Though the saying is overplayed, it suggests that rushing into any endeavor will have negative repercussions. So in regards to buying your dream car, searching diligently and giving the task at hand adequate time are essential. Ensuring you do not rush your decision will net you the best end result. The trading parallel is almost identical. Many traders, in particular new ones, get caught up in the hype, forcing their moves. The best of the trading community can wait out the pressure of needing to make a trade, knowing that another trade (or investment) will reveal itself to the patient stock market watchman. Sometimes the best trades are those that are slow and steady. The big upside movers can reverse on you just as fast as they went higher, look at JCP over the past few months. On the other hand look at another retail giant Nordstrom, where slow and steady served investors well. Patience can take on many forms when it comes to investing, either way you cut it, the best investors are patient.

Many traders fail to realize the importance of price points. When it comes to buying a car one is forced to stick to a price point, spending more than you have is just not an option. Stock prices on the other hand fluctuate often and readily, though the best investor knows what he is willing to pay for a company. When you go into the dealership or meet the guy off Craigslist, you have a set amount you want to spend. The smart car buyer also has researched the vehicle and knows what the car is worth ensuring that he or she does not spend more than the value of the car. When I buy a car I prefer to purchase under the book value, maybe due to my innate desire to get a good deal. Valuing stocks and cars are worlds apart. When it comes to a used vehicle, or new, you simple look up the NADA value and go from there. There is no real valuing tool for stocks. Though many say that the market itself values stocks, undervaluing names that lack future value and over valuing names that have the most potential. The most successful of the investing masses have the innate ability to choose quality entry and exit price points, rather than clicking the buy button and hoping for the best. Don’t be that guy who rides the winner from $20 to $100, then back down to $10, making it a net loser. Know what a stock is worth to you and what you are willing to pay for the company. Learn to have price points that you stick to, that work for you, in both your entry and exit, ensuring you don’t pay too much or never walk away making a winner a loser.

Investigation, one of the more finer points that both traders and car buyers often overlook. I see the story all the time, people buying companies and not even knowing who the CEO is. They see some buffoon on CNBC chat up some company, they buy in thinking they will get rich quick. Knowing details about your CEO is merely scratching the surface when it comes to delving into the company you wish to have in your portfolio, even if it is for a short time. You come across it on twitter and in the blogosphere, many people searching for information about the next big thing, hopping on someones coattails, but doing no research of their own. That my good sir is comparable to driving up to the dealership pointing to what you want and driving off. Yes, I know some of you do that. That may be acceptable when going and buying a new Mercedes. Though for any other car, more thought and investigation needs to go into the purchase of a vehicle. When you purchase a vehicle, maybe you run the carfax, look for issues throughout the vehicle. In my case, I like to take my investigation to the next level. I take my mechanic with me and we run the vehicle through its paces, put it up on the lift, run compression test on the engine, and so on. Similarly, that is how I like to add stocks to my portfolio. A trader who trades on a whim should be in Vegas, a trader who analyses the finer points of a company, will be rewarded. My research and analysis ensures that I don’t get a lemon, because I only like lemons in my lemonade. The same mindset can be the key to your success when trading. Knowing the ins and outs of a company can only lend your portfolio to outperform the averages.

Does your Maserati go 185?

Photo by wollombi


Posted on by Young Gun in Uncategorized Comments Off on Investing Lessons To Be Learned From Buying A Car

Housing Remains Everything

The macro tale has had a dark cloud hanging over it, the story has played out time and time again,  investors have been spooked when the housing market looks to die at our feet. Then overnight the investing climate changes, things look up, in turn crushing the shorts. Much of the investor hope and solid returns have stemmed from the hope that the housing market will save us from all of our economic blunders. These returns have resulted from the housing market profits (home builders finding the model for success in the new environment) or the housing derivative plays (people actually spending money) as the economy comes off the bottom. The brilliant economist and market guru’s suggest that the housing market can supply the much-needed crack that the market needs. The experts analysis fail to encompass all aspects of the situation at hand. In their analysis they fail to point out the sorrowing reality, the repercussions of the housing market not bottoming. Housing remains a pillar of hope for the markets and the economy, but on the flip side of the coin, it remains the nail in the coffin if it fails to perform as we all hope.

Breaking down the relationship between housing and our overall economy can be done simply. Individuals, perhaps like yourself, buy homes, or have them built, then proceed to fill them with all the wants and needs one could desire. For generations housing has fueled our economy. For countless years people have bought homes and filled them until their hearts are content. This has fueled profits for many companies, from everything based in technology to your favorite furniture company. Now what happens when the massive amounts of building and moving dissipate as they have over the past few years? All the other attributes of  the economy, everything from big box stores to the local lawn service company suffers from this slowdown.

That’s right, the economy of America remains shaky due to housing.

No, not due to the bubble we endured a few years back, rather the generational shift this bubble has caused and its repercussions on the housing market.

Even in the technology sector, where I see the most growth potential, this growth is hindered by the housing situation. Technology, in particular websites, make their money through advertising. These advertisers are the ones that produce entities to fill your humble abode.These advertisers are the ones that make televisions or furniture,  the stuff we as object obsessed Americans like to buy. Without advertising selling their goods, advertising ceases to fuel the profits of the technology sector. The sorrowing reality punches you upside your jaw, knocking the foolish investor grin off of your face. The future many of us focus on, the growth we all need to make profitable financial moves still rests on the housing sector.

For multiple generations we have put our faith in housing. It has fueled economic growth when war was no longer an option for kick starting the economy. Today we sit amidst a transition period. Today things are different (obviously). We can no longer look at housing to fix the economy for a multitude of reasons.  Most importantly, the housing bubble has destroyed the younger generations faith in housing. Buying a house as a long-term investment does not strike the same harmonious chord with the younger generation as it did with the elder generations.

The game has changed, housing no longer sits to bolster our economy. Instead the housing sector presents itself as a weight, a dead weight on the economics of America. From a patriot standpoint we must reevaluate the basics of our economy and growth we have seen for generations. From the investor standpoint we must watch the housing market like a hawk, because if the housing market goes by the wayside (again) the stock market will go as well.

Photo by Images_of_Money

Posted on by Young Gun in Uncategorized Comments Off on Housing Remains Everything

Sunday Funday: OpenTable

First off, welcome back to another installment of Sunday Funday, where I, Young Gun pick a fun oriented weekend stock ripe with potential. Over the past few years we have seen weakness in the consumer when it comes to dining in and out (excluding fast food, who benefited heavily from the trends of late). More recently, as the economy has stabilized over the past few years, dining has stabilized as well. OpenTable has had a short but troubled history, giving investors an initial great ride, then leaving them to the hungry wolves. Today, the company sits among the new tech comers as an established company. Investors are comfortable with the ins and outs of the reservation giant, ensuring that they will prevail in the future.

The competition “bears” a majority of the negativity when it comes to Opentable. Observing the argument, I see the competition merely nipping at the heels of a giant. There is a fear that Google may take on OpenTable, yes this is a possibility. Google, the king of technology, focuses on having its feet in every body of water, rather than having the control of the biggest piece of ocean. In simpler terms, Google is expected by investors to delve into every technology market, even if it is not going to be the leader. Obviously Google is a giant not to be taken lately, but when you take a look at the  growing market OpenTable has capitalized on, the competition should be more fearing this established and growing company.

As a firm believer in the “new” technology sector, I believe this company embodies all that the future holds. OpenTable allows its users to not only be lazy, but avoids the phone calls and the challenges of making reservations. Having both risen and fallen significantly over the past few years, it allows investors to have access to the new and sleek technology space without as much of the ridiculous price action as these new tech companies that have come public in recent months. OpenTable may just be the perfect combination of growth and valuation in a sector that seems unbending through the fluctuations in the amount of diners.


I prefer to point out companies before they pop 15%, obviously that did not happen. The above article has been in my Sunday Funday queue for quite some time, but with the recent destruction we have seen in the technology sector, I thought it best to avoid talking up any technology based company before they prove their merit through quartely results. Refer to On This Applelicious Day, Reminding You Investing Is Not Gambling for a more detailed analysis of why to wait until after earnings to put money to work.

What is Sunday Funday?

Posted on by Young Gun in Sunday Funday Comments Off on Sunday Funday: OpenTable

Apple Finally Challenges Itself

Recently the hatred for Apple has grown to massive levels. Many of the pros sit on their CNBC pulpits suggest that the Apples era sits behind us. From my standpoint, I undoubtedly see many challenges facing the technology giant in the coming months. On the flip side of the coin, I still believe they have a one of a kind product. Often times I sit wondering what the next big thing is, what will capture the American shopper over the holiday shopping season, what the crazy consumers will stampede for in the coming months. It turns out, that once again the unruly citizens of the world sit awaiting the next round of Apple products. Apple has repeatedly failed to avoid the seasonality of their premier product, the iPhone. On top of the pressure of timing, Apple has many products sitting in the pipeline. That combination of challenges may scream disaster for the technology giant, as Apple rushes out the next round of evolution in the technological world. As we all know, the more products you launch (in particular when it comes to technology), the more chances of failure.

Yes, Apple recently missed its earnings. They still moved massive amounts of product and the growth in the Apple iPads was just monumental. I am not concerned with the previous quarter, I sit fearful of what is yet to come. When it comes to Apples stock, investors have certain expectations, often lofty. In the past Apple has beat earnings but missed selling a certain number of  other products, in turn devastating the stock. My concerns sit on the possibility that Apple will not be able to meet expectations when their portfolio of products becomes more diversified, as it will in the coming months. Apple has for the longest time been able to push out great products and continually beat expectations. What happens when they are unable to sell as many products, because they are unable to be first-in-class in all their product offerings?

This may strike you as an unrealistic expectation. Why would Apple not sell more than expected? People always expect the most and best of the tech giant. I see why these high expectations are justified, but times, they are a-changin’. For years now the staple Apple product has been the iPhone. It has revolutionized they way we interact with the world and most importantly it makes my daily life that much easier. As Apple branches out into other arenas and attempts to change the way we interact with other household electronics, the Apple iPhone story may fall by the wayside. Not only that, but today’s competition is not going out without a fight. With the possibility of three top of the line products for sale by Christmas, what happens if one of these products flops, with minimal sales?

Could Apple stock now have too much risk associated with it?

Apple has served as investors bank for a long time. It has been the safe haven when the storms that is Europe came crashing down with its hurricane force winds and massive flooding. Those that held Apple during the storm of the last few years, were rewarded with an amazing return. The game for Apple may have just gotten a lot harder and much more realistic. Apple now has some real challenges ahead of it. Real challenges exist when launching any new product, in particular in the technology space. Look at the issues that the new iPad had with heat, the 4S had with its battery and software, and the iPhone 4 with its antenna issue. These issues were remedied easily, what if the next issue cannot be? Yes, the win could be huge with record revenues, record profits, and record percentage return for investors. One must ask him or herself,  are the rewards worth the risk?

Photo by plasticpeople


Posted on by Young Gun in Uncategorized 2 Comments