The Only Way To Play Facebook

A while back I wrote a piece about Facebook, focusing on the stupidity of the downside arguments. I have never seen a stock where so many are focused on their ideals about where technology is going rather than trading the stock. Had you just made the trade instead of listening to what Cuban said (which he later almost completely revoked), you would be fine. Now lets go over a few points so you don’t make yourself look like a fool again.

No one knows where the social monster will end up. Hell it could even get so big it will eat itself. In more simple terms, social could become an all encompassing aspect of our lives and it may become the norm for us to cut out social interaction through technology. This does not mean that you can not make money on the trade. Let’s look back at something comparable, so as to better relate it. We all remember the Netflix tale, the famous Cramer pump and dump. Where shorts were burning their houses for insurance money and longer were claiming Obama was going to offer Obamaflix all the way up to $300. I remembered my own inaction like it was yesterday. I wanted to buy in at $99. I wasn’t even looking for anything but to see $115 again (I’m a simple guy, I don’t ask for much). I was so fearful of the longevity of their business model I didn’t buy in. I didn’t buy in at $100. I didn’t buy in at $150. I didn’t… you get the point. Lucky for me I didn’t try to short it anywhere on the way up either. The long and the short of it is(elementary pun intended) that you can’t fight where the market wants to take these hot stocks.

Facebook has moved over 50 percent in the last 3 months. I am not saying go out any buy it tomorrow. Though I do believe instagram is taking twitters formula and owning them at it (though thats another post). The point is they aren’t going out of business yet, well not until they launch their own platform on the RIM phone (cause it sure won’t be on an iPhone or Android). I think the moment of elated buying has past, people don’t buy Facebook profiles for Jesus’s Birthday, they buy everything else. I think there are currently better plays than the Book, but what you should take to heart is the simple and key lesson everyone overlooked.

If you play Facebook through a real long or short thesis you are asking to be taken out back and shot (preferably with a Smith and Wesson). Ask around. Play it like a trader and you will be rewarded. Most importantly look through the fog to see the marker, the fog being the fools caught up in their ideologies and the marker being price action.

Photo by Steven Rosenbaum

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Irrelevant Arguments

Silencing out the noise remains one of the hardest aspect of investing. This morning I witnessed a battle royale over what would happen with Facebook during this lock up expiration. The video is posted below:

Now lets look at the contrary take, voiced by Mark Cuban. Here is the link to said article.

Let us take a big breath, step back into reality separate the fact from fiction, the relevant from irrelevant.

Assuming that some stroke of intelligence carried you to this site, I shall enlighten you on both pieces of rhetorical nonsense that were spewed above.

First off let’s get one thing straight, just because Mark Cuban has a vendetta against Facebook does not correlate to you changing your investment thesis. Perhaps he does not allocate a substantial amount of funds to his online marketing (meaning that the routine 3 g’s was costly), or even better maybe the cost benefit of utilizing Facebook did not play out how he wished. As I remember when GM pulled ads from Facebook many months ago, people took the news at face value, failing to delve deeper into the issue. Guess what fools? Facebook had a record quarter due to advertisement, without giving a thought to the criticism posed by General Motors. So perhaps Facebook is set to do just fine excluding Mark Cubans good funds. Perhaps their rich fees work for some and not for others. One persons anecdotal opinion should not make your investing decision. Now at the end of the quarter if we see marketing dollars flee the world of Facebook due to the cost of advertising, perhaps then we should take what Cuban has to say into account, until then jut tell him to go back to being a vulture capitalist

What everyone fails to realize is that Facebook has monetized mobile. The hilarity of that is many of you are Facebook mobile users and barely really you are being made a pretty penny off of. Zuck has done what the tech haters said was not possible. Not only that, but did anyone catch they fact they have developed a great working relationship with Apple, ya know the biggest tech company in the world.  Facebook has gone from this company that was looking at Zynga for money to keep the lights on, to a company that owns the advertising space (they own it because who do you know that’s not on Facebook?). Have they finished the advertising revolution? No. We will see a lot out of this giant in the coming years. What’s important to note is that they are making inroads on a business model that works. Not only that, but the mass exodus that everyone anticipated never happened. The pundits said that Facebook users would leave the platform for a better alternative…. oh wait those users instead just started integrating Instagram into their Facebook lives. So what we have is a company that has successfully started to monetize a free product and has been able to avoid running off users while continually growing their base. Yeah your right, a horrible company….

Many are concerned with this GIANT lockup expiration. Many initial Facebook investors want out after this roller coaster ride. Actually, many investors want in at these deflated prices (those that couldn’t get in initially or were worried by the lockup). So no tomorrow will not tell us what the expiration means, the next few months will. I tend to agree with one of the talking heads on CNBC (which never happens), that mass buying will occur. Many investors have been interested in Facebook but seen the headwinds, particularly the ridiculous amounts of shares being sold in lock up expiration.  We are about to pass that next milestone of concern and the dynamics may just change. The tailwinds are beginning to outweigh the headwinds. In more simple English for ya’ll: more good and less bad means the stock goes up.

If Facebook keeps making money, continues growing its daily active users and ensures that they are fully active on their platform, we may see the reversal of a lifetime.

Photo by _Max-B

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I Reiterate, RadioShack Can Save Best Buy

At this point, what can save big box retail?

Simple, making the big box store a smaller size, so said company can afford to keep the doors open.

I wrote a piece a while back in which I pointed out some of the issues and potential solutions to the dilemmas of both Best Buy and Radioshack.

Here is a little bit of what I had to say:

In a faltering business the best move may be consolidation. It appears that there are many options when it comes to buying electronics, this is true to a certain extent. Though, when it comes to quality electronic stores there are just a few and Best Buy presents itself as a giant in the space. Consolidation may be key here, because one of issues that has repeatedly surfaced pertains to Best Buys square footage. These huge box stores have large cost associated with them. Consumers electronics, computing, and mobile phones are the largest aspects of the Best Buy operation totaling almost 3/4 of revenue. The 3/4 of their revenue obviously does not take up 3/4 of their square footage. Through consolidation Best Buy could push their premium, large margin products in a smaller square footage store. With such a large portion of their revenues in such a specified aspect of their company, their large stores are just not doing them justice. Looking back at Circuit City, one can recall that the death of this electronics giant was due to square footage as well, making the Best Buy argument for smaller square footage very real. An acquisition of RadioShack could be just the move to smaller square footage that Best Buy needs.

Einhorn recently mentioned exiting his position in the electronics giant, citing the company for not having a solid strategy going forward. To compete with the online giants Best Buy will undoubtedly have to rethink its game plan, or it will fall by the wayside like Circuit City. The RadioShack footprint encompasses over 7300 stores and unlike Best Buy, RadioShack sits in many malls and smaller shopping centers. The RadioShack footprint is undoubtedly worth its weight in gold. The strategy should slap these execs in the face, take their giant status to that of a god. If Best Buy can go from being a mere big box store to a conglomerate of big and small box stores the opportunities are boundless. Radioshack has the ability to be in any small town or any neighborhood, an ability that Best Buy does not and will never be able to have. Taking the abilities of RadioShack and adding it to the arsenal of Best Buy could revolutionize Best Buy’s strategy and save their dying industry. The smaller stores could suggest margin compression, but when it comes to small stores closer to home, customers have and always will pay for convenience.

Read the full article here

Since the death of Circuit City Best Buy has stood as the premium retailer for consumer electronics. As competition has expanded in the online arena, many have questioned not only the potential of Best Buy, but the future profitability of electronic retail stores in general.

When analysts analyze technology oriented companies they often fail to realize that companies exist beside Apple. There are so many other great consumer electronics out there, that people love to buy and enjoy interacting with in a store setting. Everything from the GoPro Hero, to the Xbox, Nexus tablets, Chromebook, to giant televisions. Apple doesn’t even exist in the arenas I previously mentioned (though they may potentially enter the televisions space). Obviously there are other great and specialized electronics I failed to mention that need a home on a shelf. Just take a look at the Kindle products, Amazon saw the necessity of the consumer interaction. Why else do you think Amazon would have gotten Target to carry their product.  Looking forward, into the great (Obamafull) future, Best Buy has a place.

I hear it day in and day out. Take a look at Apple, they are the prime example of a successful retail endeavor  That holds some merit, Apple has done well with their retail ambitions. But guess what?! I walked by multiple Microsoft Surface tablet booths over the past few weeks and there was not even any space to see the product. This means that Americans love consumer electronics, love playing with them, and love buying them in person. Not only do they like buying Apple products in person, they like buying any high-end consumer electronic that can strike their interest. Best Buy can take many of the key aspects Apple has embodied, expand on them, and give Apple a run for its money. Why do you think Schulze remains so keen on taking over the company? He sees the potential! He sees potential in making Best Buy once again the home to electronics, a place where one can buy and become informed on products.

Consumers are concerned with Best Buy’s higher prices. If someone can change the perception of Best Buy (perhaps Schulze), to embody an experience and not only a product purchase, the game can change. Apple doesn’t just sell the product, they sell the Apple experience  If I can go to Best Buy and purchase a Chromebook or a GoPro Hero and then take a course on these products, it can change the whole consumer retail game. If I can go and buy these products and see how they are utilized to change my life, I will continue to utilize Best Buy. There are great products in the retail arena that the mass public wants to purchase, wants to know more about, wants to talk to a specialist about, and Best Buy remains the place for all this to happen. If Best Buy could just successfully brand itself as offering the consumer more, the premium would no longer even worry consumers. Schulze sees the opportunity to muscle Best Buy into becoming what he wants it to be

The only way that RadioShack will have the best products is through Best Buy. The only way RadioShack will survive will be to have the best products. The only way that Best Buy will compete with the likes of Amazon is to try an approach besides big box stores.

Photo by osde8info

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I Told You, But You Didn’t Listen

Some time ago I voiced my concerns with Apple. Suggesting that their fascination to be the lead in every consumer electronic device would result in more headwinds and a greater possibilities 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?

Read the whole article here.

Now it seems that these ideals I mentioned months ago are coming to fruition. Apple lately announced it was entering into the internet radio arena in the coming months, though it has no advertisement wing to fuel these royalty cost. We have seen the launch of new products which have repeatedly had their own struggles. I forewarned the possibility of struggles and the closing of the “Apple Bank,” we now see this actually happening with Apple trading below $500. We have seen Apple launch a mediocre tablet at an Apple price, showing that they cannot effectively have the best product in every arena. Apple succeeded by doing a few things to perfection, now they wish to go back to doing everything halfheartedly.

Today I see many touting Apple. Suggesting that now is the time to buy. Demand for their products remains great. The bulls continue to brush off any discerning Apple news. Apple undoubtedly makes a great product. Though as I have said time and time again, the tech space poses impossible challenges. Staying on the cutting edge remains difficult no matter how many millions or billions you can spend. Microsoft just recently launched the Surface tablet that they put countless amounts of R&D into, with no guarantees for success. No one can sit here and say that the Apple T.V. will sell out in stores, that the public will love it. It’s a product in a marketplace and there are no guarantees.

It comes down to this simple concept: Apple will not be able to do everything better. Yes they have been able to make better products or software over the years. No one can slight them on that front. Looking at Tim Cooks call to move away from Google maps to an obviously inferior product, we see a different Apple. Not only that, but we see headwinds in the future. Apple has laid the foundation for the smartphone and tablet industry, no one says that the competition is not allowed to buy the plot where the foundation lay and build a better house (or consumer retail product in this case).

“It is always the great buildings and the tall tress which are struck by lightning.” – Herodotus The Histories

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Tablet Price Shall Triumph

When you buy a premium product, what matters?

Quality and workmanship.

When you buy a mediocre product, what matters?

Price, Price, Price!!!


Consumers want the most they can get for their money. This previous statement will always hold true. Basic economics tells us that each consumer will wish to get the most utility that their buying power allows. When it comes to the lower end of consumer electronics, price trumps capabilities time and time again. Amazon has not sold countless Kindles because they are “the best,” rather because they are the best for their price point. Many parallels can be drawn to different examples, different merchandise  and different consumer fads. At the end of the day we do know that the consumer buying the low-end tablet remains financially strapped, so price takes precedence over all other measures of quality.

Did you know the iPhone subsidiary usually runs about $400?

You are likely decent at math, this means that the “cheap” iPhone cost under $200.

Apple has successfully owned the smart phone market since its inception. Anyone remotely educated can infer that this has much to do with price. The $200 price target remains an important aspect when it comes to the consumer electronics. Why do you think that both Google and Amazon have prices at or around this price point for their tablets? Now your telling me that Apple wishes to take the lower end tablet market by storm and they are not concerned with price? Does anyone else see the fallacy in their methodology? When it comes to lower end consumers, price remains one of the most important aspects. We are not talking about high-end consumer electronics where the customer doesn’t care if the price is $500 or $1000. We are talking about Christmas shoppers on a budget, pinching pennies.

What Apple has failed to realize and both Amazon and Google have figured out. These new age tech giants have come to realize that a small-sized tablet serves as a compliment to a PC, rather than a replacement. Consumers will not think twice about shoveling out hundreds of dollars when they no longer have to buy the dinosaur of a PC. When they are merely buying a device that serves to assist them in their computing needs (in addition to a PC), spending more than $200 seems like a stretch. Apple seems to be more concerned with ensuring they get their “Apple Premium” than making sure they capture the lower end of the tablet market. This could in turn cost Apple much more than they think in the coming months and years. As Apple has been synonymous with quality products, putting out a mediocre product at a steep price doesn’t bode well for their brand.

Price remains everything. I’m worried about the iPad mini being priced 30 dollars to high. Both the Nexus and Kindle Fire are decent to quality products. Though the tech heads hate on one or the other for various reasons, at the end of the day tech gurus do not drive sales. The mass consumers drive sales and at the $200 price range these consumer are very price conscious. In the coming months we will sit with bated breath, wondering if consumers are willing to pay that extra $129 for the Apple premium. In my opinion price remains the deciding factor for the low-end tablet consumer and the real fight will be between Google and Amazon.

And they say I’m A Fool… Sure.

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