Digging for gold

The market is in a correction. Nobody can really explain it. Nobody knows what’s going on. Is it oil weighing down on the economy, threatening to cause oil & gas companies to default? Is it China’s slower-than-expected growth impacting the rest of the world? Has the US overreached its value and investors are finally cashing out? Who knows. I certainly don’t and I’m willing to bet not many people do. Nobody knows what the future holds. When everyone’s fleeing a burning building, there are always some valuables left inside for anyone foolish enough to charge into the fire. You can get burned, walk away with gold, or maybe both.

I’m definitely no expert stockpicker. In fact I hardly know anything about picking stocks. I just know which companies have good products and that I can see making money in the future. I know about companies I believe in. Keeping very much in line with Warren Buffet’s investing philosophy of ‘investing in what you know’, I look at companies I personally use.  This almost always means that the company will be either food- or technology-related (draw your own conclusions from that).  I’ll look at its key financials, sure, but I’m very interested in recent news and products.  The number can only say so much about future performance.  At the end of the day it comes down to ‘will people pay money for this company’s product’ — and that, I can evaluate (or at least try). This series will document my thoughts on some companies I’m interested in.  First up…

Facebook – FB has seen an accelerated growth in earnings per share over the past 5 quarters. This good earnings momentum should hopefully hold for the next few quarters. Analysts’ predictions have also been increasing and FB has consistently beaten even these predictions — all good signs. 44/53 analysts have FB as a buy and the average stock price target is $130 vs current $105. Barron’s MarketGrader algorithm ranks FB in the 96th percentile of all companies. Most of all though, I believe in FB’s products. It owns Whatsapp, Instagram, and Oculus, two products I use frequently and one that I hope to in the future. Whatsapp has a massive user base that use it religiously and Instagram’s ads are non-invasive. The ads on IG are only increasing but they are being presented in ways that aren’t pushing me away from the site. And I’m the type to pull the quick trigger on that – if something irritates me – goodbye. Let’s not forget FB; everyone uses FB. Apart from Google, FB is the only place I would ever consider advertising for a small business – and it seems to work. I don’t see anything coming close to supplanting FB as humanity’s go-to social network (sorry Google+, you tried your best). Add to that FB’s goal to bring internet to the world and Zuck’s personal resolution to create a virtual personal assistant… FB has plenty of room to grow. FB is a buy for me.

 

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