Th enthusiasm for social-media stocks is getting awful high and Michael Santoli wrote about it in this recent Barron's article:
Barron's: Bubble Trouble
According to the article, the combined revenue of eight leading social-media businesses (that are apparently being value at $ 200 billion) is only $ 3.5 billion (yikes!).
The article also points out that the Washington Post (WPO) alone, with a market value of $ 3.4 billion (a mere $ 196 billion plus less), has more in revenue (actually, roughly $ 1 billion more).
In addition, Some of the large public technology companies (Google: GOOG, Apple; AAPL, Microsoft: MSFT among others) carry modest valuations relative to earnings yet stand to potentially benefit from trends in mobile computing and/or social media in significant ways.
From the Barron's article.
...this isn't a straight replay of the '90s tech bubble, and therefore not a once-in-a-century misallocation of capital that will collapse a broad swath of the U.S. stock market...But in a market where...20% of large tech stocks trade at single-digit price/earnings ratios, the social-media group looks to be an overheated microclimate in a generally temperate investing zone.
Large cap tech stocks also happen to be much better capitalized and have relatively proven businesses to fund future investments in the bigger opportunities.
So even if upside is more limited (as is the downside), an investor can participate in some rather dynamic trends but doesn't have to speculate nearly as much to produce a nice return.
Check out the full article.
Adam
Long positions in WPO, GOOG, AAPL, and MSFT
Related post:
Technology Stocks
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Applying Newton's Fourth Law
Origin of Newton's 4th Law?
"Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffett
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Find good businesses; buy at nice discounts to value; stay within limits & stick to what's understandable (necessarily unique for each investor); minimize trading, frictional costs, & errors of all kinds.
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This site's emphasis? Put simply, it's on finding and buying -- with the long-term in mind -- good businesses at a plain discount to conservatively estimated value; it's on selling shares of those well-bought high quality business reluctantly. The view here is that selling makes sense only when core economics become permanently impaired, prospects have been misjudged, market price not just somewhat but, instead, meaningfully exceed per share intrinsic value, or opportunity costs are high. Buy/sell decisions aren't just an opportunity to increase returns; they're also an opportunity to make mistakes. It's easy to overemphasize the former and forget the latter. The focus here is on minimizing trading, frictional costs, and errors of all kinds; it's on staying comfortably within realistically assessed limits. First and foremost is the view that an investor should never make a specific investment based upon what someone else thinks. In other words, what makes sense to own is necessarily unique for each investor and it'd be unwise to not act accordingly. So, more generally, this site simply attempts to better understand some useful principles and ideas in context of investment. It's about, in a practical sense, what tends to work over the long haul as well as what, at times, gets the investor into trouble. It's not about grand theories in finance and economics. These too often distract from what matters or, worse yet, lead to costly misjudgments. As a result, they are mostly viewed with a healthy dose of skepticism here. Otherwise, the best thinking across disciplines should be learned well then put to good use in a way that's uniquely suitable.
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Notable Quote
"Warren and I have not made our way in life by making successful macroeconomic predictions and betting on our conclusions.
Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us. But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time.
I recommend to all of you exactly the same attitude.
It's kind of a snare and a delusion to outguess macroeconomic cycles... ...very few people do it successfully and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?" - Charlie Munger
Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us. But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time.
I recommend to all of you exactly the same attitude.
It's kind of a snare and a delusion to outguess macroeconomic cycles... ...very few people do it successfully and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?" - Charlie Munger