Archive for February, 2012

Closing 2 Trades (AAPL, NILE, AMZN, RAX)

By: ispeculatornew | Date posted: 02.16.2012 (8:02 pm)

Ah well…. this is certainly a bitter sweet post. On the one hand, it turned out that Blue Nile (NILE) did report very poor earnings and the “no-brainer” trade that I had done between the best (AAPL) and the worst (NILE) turned out to be a great one. Today, NILE lost 10% or so (it was down much more at some points) leaving the trade at +24,30% as of the close. It will be closed out tomorrow morning on the open.

Another trade that will be closed is a far worse story. Readers here know that one trade I avoid is opening new trades when a company is about to report earnings, it’s risky and seems much more like Russian Roulette than investing to me. I ended up doing the exact opposite on Monday, opening a trade where I went short Rackspace Hosting (RAX) against Amazon (AMZN). I got an email from a reader a few hours later telling me that RAX was reporting earnings on that same day. Couldn’t be. Right? He was right. I had checked my dashboard that weekend and had witched the trade I was going to take late Sunday. But I forgot to look back at earnings dates…! So from that moment on, I hoped but of course RAX came out with great numbers, which is probably best since I should be punished for such a mistake. Long story short, that trade is currently down -20,16% and will also be closed!

The average trade has returned 4.92% so far this year which is still very solid. Stay tuned for a new pick on Monday!

 

Ultimate Sustainable Dividend Portfolio – February 2012 Update

By: ispeculatornew | Date posted: 02.16.2012 (5:00 am)

Late last year, I did a few surveys to find out what IntelligentSpeculator readers liked the most and wanted to see more of. The Ultimate Sustainable Dividend Portfolio post that we published in September was clearly a favorite.After publishing an update in January, it is back today, with data as of Tuesday’s close.

It made us possible for me to give 20 dividend stock picks that would provide long term sustainable dividend flows to build passive income. I’ve decided to build upon this by doing monthly updates of this portfolio. The picks were made on September 14th 2011 so I will be using the previous night’s prices as my reference.

The 20 stocks were chosen out of thousands and I will be making some changes in the near future with one main objective; Keep out any stocks that could potentially limit their dividend growth in the near future. The goal remains the same: finding the ultimate stocks that can provide sustainable dividend growth.

[table “366” not found /]

I do expect for dividends to be a bit more volatile from month to month but they should increase steadily over time so that will be an important metric. February was actually the first month with over $100 in dividends! In the next few months, I will be giving monthly updates to this amount so we’ll see how that goes. Here is the amount to start off:

Ultimate Sustainable Dividend Portfolio News

[table “367” not found /]

Returns

I will also be comparing the returns of this portfolio to the return of the S&P500 (with dividends reinvested).. Keep in mind that I would expect the Ultimate Sustainable to do better in difficult times and worse in great times. Why? The USDP is a more stable portfolio that will fluctuate less over time. That is why I’m (happily) surprised to see the USDP outperforming the S&P500… hopefully it continues.

Trades

Every month, I will discuss trades that will be done in the portfolio, they will only be done once per month and most months will actually have no new activity. These are sustainable dividend picks so there is no reason to become too active.

As I have discussed in the recent past, there are two main flaws that I will want to address in the near future for this portfolio:

Over exposure to the oil sector (I will likely take out an oil stock in the next few months)
Under exposure to international dividend stocks

For now, I do expect to keep the portfolio at 20 stocks so any new stock being added will replace an existing one. I strongly recommend that you join our free mailing list if you are interested in dividend stocks, that is where most of the discussions regarding new stocks to add will be done. To sign up, simply enter your name below:

As always, I would love to hear your thoughts on this. It is the first of many posts on the USDP and I do hope to make this a very interesting part of this blog.

How Much Is Facebook Worth? Much More Than $100B

By: ispeculatornew | Date posted: 02.15.2012 (5:00 am)

You know that I’m a big believer in Facebook (FB) and have said in the past that it was one of the best bargains out there. After seeing the company finally file for an IPO, I’ve had dozens of discussions both with active investors and the typical reader on this blog. I’ve also been watching TV, reading newspapers and magazines. It seems like the same opinion is coming up over and over. Those 5 or 6 main reasons why buying Facebook at a $100 billion valuation is a bad idea. I don’t love being on the opposite side of the majority but in such a case, I’m more than ready to argue with anyone who thinks that this is the latest sign of a new internet bubble. Most of the arguments are flawed in my opinion….In fact, a recent WSj poll had the majority of those polled saying Facebook was worth less than $75B.

Let’s start off by looking at a few things that are being said:

Theory #1-Facebook Has Already Peaked At 800M-1B Users

Myth Explained: One if not the biggest argument that is being brought up is that Facebook’s days of high growth are a thing of the past. That with already nearly 1 billion users, there is very limited space for growth.

Counter-Argument: I would argue that it’s irrelevant to look at the growth in users. Sure, I want to see Facebook continue to be the dominant social network but the growth number that we should look at is not “users growth” but revenues/profits growth. That number is growing at nearly 100% and I would argue that it will accelerate in the coming years.

Theory #2-Facebook No Way To Monetize Its Users

Myth Explained: Facebook is seen by many as being a one trick pony, that can only count on advertising to grow revenues.

Counter-Argument: First off, that one trick is a darn good one. The other company that has been getting the same accusation is Google (GOOG) which has managed to do fairly well in the last decade don’t you think? I would argue that as Facebook continues to evolve, Facebook Credits and a variety of other revenue sources will become big parts of the business.

Percentage of revenue generated from advertising:

2011: 85%
2010: 95%
2009: 98%

Theory #3-Facebook Will Eventually Crumble In The Same Way That MySpace Did

Myth Explained: Over the recent 10 years, a large number of social networks have come and gone, each happening fairly quickly with News Corp’s MySpace being the most famous example. The launch of Google+ is certainly a viable threat to Facebook.

Counter-Argument: I think it’s important to say that I think there is some credibility to this argument. There is certainly a possibility that it could happen. I would add though that many said that about Google in search a decade ago as it was following the tracks of Yahoo, Altavista, Lycos and others. Facebook does seem to have build a solid enough lead to remain relevant for a very long time. I don’t think the rise of Google+ will necessarily mean the fall of Facebook, as there is certainly enough space for both to co-exist.

Theory #4-Facebook’s Valuation Is Insane

Myth Explained: For Facebook to trade at over 25 times in 2011 revenues seems completely unreasonable.

Counter-Argument: Facebook has been a high margin business to this day and made nearly $1 billion in earnings last year. I would expect that number to double (more or less) this year, making the $100B valuation a forward P/E of 50 or so… that suddenly does not look outrageous does it? Even looking at revenues, its valuation is much more reasonable than recent IPO’s such as LinkedIn (LNKD), Pandora (P), etc. The difference is that because Facebook’s numbers are higher, so is the valuation and a 100B valuation seems much more outrageous than a $10B one, even if the ratios are the same.

Theory #5-There Is Little To No Upside At This Valuation

Myth Explained: If Facebook starts trading at a $100B valuation (perhaps even more when it starts trading), how much higher can it go when you consider that Google (GOOG), the much bigger company trades at $200B with Amazon (AMZN) at $87B or so.

Counter-Argument: This one is certainly an interesting argument. When you consider that Apple (AAPL), the biggest listed company in the world is not even at $500B, it seems unlikely that FB could ever become a success story in the way that Microsoft, Apple and others turned out to be (turning poor into millionaires, etc). I’d agree with that. However, I would say that it’s almost impossible to get those types of winning stocks and trying to do so seems like a losing proposition. However, saying that Facebook could become a $200-300B company within a decade makes it a much more attractive pick than most valuations you can find on the market.

Theory #6-Facebook Does Not Have As Many Users As It Claims

Myth Explained: Facebook has been claiming a large number of active users but the release of the fact that they consider even a user that clicks on a “like” button as active got many people wondering about the users numbers.

Counter-Argument: I guess there is some truth to that and if you are buying Facebook and valuing off of the active users numbers, that might be flawed. I would argue that it’s not that important. Users are not made equal and the fact that Facebook now gets 20% of all internet pages seen is more than enough to convince me of the solidity of their user base. What is the number? Difficult to say. But I would say that Google and Facebook are two names that have the most interactions with users by very far.

Theory #7-Zuckerberg Is Not The Right Guy For The Job

Myth Explained: Mark Zuckerberg has clearly made many mistakes in the years since founding Facebook out of his Harvard dorm and thanks to some smart moves, he still holds 57% of voting power in the company, enough to control everything going on. Does he have the right focus? “We don’t build services to make money; we make money to build better services,” Mr. Zuckerberg wrote. “These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits.”

Counter-Argument: Certainly, I can understand the concern but I would argue two things. First is that there is no doubt that Zuckerberg has improved a ton since starting the company. The company continues to face some questions, especially concerning privacy but I think overall the progress has been solid. Facebook continues to be focused on long term growth rather than the short term profits. That will likely make progress slower but I do think it is the right way to move ahead from the shareholders perspective.

So What Is Facebook Worth?

One of the more common comparisons is to Google. Take a look at this chart:

Source: The Telegraph

Revenue Per User

I would personally say that it is deeply flawed. Why? The main thing is that if you look at Google, the search engine’s model was fairly simple. Provide search engine results better than anyone else then put up ads on those pages. 10 years later, that is still the model that seems to be generating most of Google’s revenues. For Facebook, the story is very different as there are many different ways that Facebook could make profits. Advertising is one of course, but so are credits, taking companies that use its ecosystem (Zynga, TripAdvisor, Netflix, etc). Facebook could create a highly personalized ad target that would rival Google’s “adsense”. There are hundreds of different ways to do it but Facebook has not been working on those to this point. And I don’t think anyone could blame them.

How Would I Price Facebook?

I personally believe that the company will be able to keep up solid growth for 2-3 more years without any problem and hopefully increase its profits to $4-5 billion per year within 3 -4 years. That would imply very high growth but it’s reasonable in my opinion. At that point, the company could be trading at a P/E of 45 or so (in a similar range to companies such as Amazon (AMZN) and Baidu (BIDU). What would its value then be? It would be over $200B. Does that sound over optimistic? I don’t think so, I think those estimates are more than reasonable and I would even personally bet on strong growth in the next few years., But that range seems very reasonable.

There is downside of course but I do think that it is fairly limited which is always a great sign when evaluating a company such as Facebook.

Do you agree with my analysis? If not, which part would you disagree more with?

Things Are Only Getting Worse

By: ispeculatornew | Date posted: 02.14.2012 (5:00 am)

Look at the S&P500 in the past few months and you could possibly think that all of our problems are getting fixed. The market has increased 25% or so since hitting 1074.77 in October. Sure, you could argue that the relationship between the economy and the markets is not perfect but let’s take a closer look at some of the issues that we were discussing 4 months ago and how much things have improved since then.

#1-Greece – The most important country dealing with a default possibility since Argentina continues to struggle and live through day-by-day negotiations. The Greek government is still trying to secure a 130 billion Euro package. No, this package would not help Greece avoid default but simply delay it a bit longer. Why is that critical? To give foreign banks (especially European ones) time to adjust and get better prepared for what is a certainty; that the EU will face its first sovereign default.

#2-Europe – As Europe eventually goes down, attention will start going towards Ireland, Iceland, Portugal. And slowly but surely, Italy and Spain will start to look increasingly vulnerable. Already, Italy is paying near 7% on its new debt issues which is clearly unsustainable for a country that already has a rocket high debt ratio.

And in the US????

#1-Jobs – Surely things are looking better right? The unemployment numbers are looking good on the surface at 8.3%, especially when you consider that in October 2009 that rate was at 10%. There is a less optimistic view though. What that rate does not show however is all of those that have given up and stopped looking for a job. Why? Because those individuals are not considered in the unemployment rate. Here is a chart that gives you a much more accurate image of what’s going on… doesn’t look so great anymore does it?

#2 -Real Estate – The housing crash has been a huge part of the problem in recent years and unfortunately, even on the surface, there is nothing positive to report. While it’s not true in the entire country, the overall house pricing index has started to decline again with house prices down 4% compared to last year. The bigger problem is that few if any expect prices to rebound anytime soon. The more optimistic predict that prices will stay at the same levels while many others predict that prices will go much lower.

#3-Deleveraging – Consumers and businesses had been spending much more than they were supposed to which got them into a lot of trouble because of their debts.. That includes some financial institutions but also a lot of common people. The result? Businesses are building up cash reserves, while workers are beginning to save more of their hard earned money. On an individual level that is a great thing and it’s probably good in the long term for the health of the economy. But that will make the recovery a lot more challenging in the short to medium term.

#4-Government Spending – We all know about the US government deficits and the debt explosion. The bad part though is that if things are this bad after all of this government spending, what will happen when the government starts putting the break on some of that spending? It will happen sooner rather than later and that will put pressure on the recovery, especially with many of us trusting the government less and less.

#5-Uncertainty – With the US government preparing for a presidential election in November, it’s unlikely that we will see much action from the government to help things because the already conflicting houses will be even less motivated to help each other out on the eve of an election…

Any Good News?

Well the market has been rising… corporate profits are fairly good… but is that enough? Maybe you should start looking at how to invest when your country is going bankrupt….

New Stock Pick: Long Amazon (AMZN) & Short Rackspace (RAX)

By: ispeculatornew | Date posted: 02.13.2012 (5:00 am)

Last week did not turn out to be a good one for my stock picks, especially for my long position on TripAdvisor (TRIP) which was finally closed on Friday after a brutal day Thursday when the company announced disappointing results. Worst week in some time but I am still up significantly on my picks so far this year so for now I can only look at the lessons learned from that pick and then move on which I am doing today.

Today I am making a play on the clouds and while Amazon is far from a pure “cloud” play, it is a growing business on its end. Let’s start off by looking at the numbers:

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Long Amazon (AMZN)

I have been very reluctant to buy Amazon (AMZN) in recent months despite the fact that I love the company. Why? It has been way too expensive which was properly reflected in my opinion in my 2012 tech stock power rankings. You could say #7 was too high but I believe in AMZN tremendously, especially over the longer term.  The fact though is that after its recent drop (following Q4 earnings), AMZN is better priced and is now trading at comparable P/E ratios to a company like Rackspace (RAX) which makes it a great play in my opinion. Amazon is trading at a smaller forward P/E, has been growing sales more quickly and profits recently took a hit as the company continues to reinvest into its different businesses but I think that is a very smart decision on their part.

FYI – I do not pay as much attention to AMZN’s trend analysis as the huge drop following its latest earnings obviously caused all of the bad momentum

Short Rackspace (RAX)

Rackspace certainly has a great business model but despite the fact that it is a great “cloud computing” play, I think the company is way too expensive. It does have a good place in its industry but it’s easy to forget that it is a fairly competitive, low-margin business and that RAX has not seen profits explode in any way. The recent drop by AMZN following its earnings has finally provided me an opportunity to buy AMZN as RAX has also been priced very expensively in recent months. One downside is that cloud computing continues to be a “hyped up industry” with many new investors getting involved. That could certainly continue.

Disclosure: No positions on Amazon (AMZN) or Rackspace (RAX) but this trade will be opened on Monday morning

Financial Readings

By: ispeculatornew | Date posted: 02.11.2012 (2:28 pm)

Hi everyone!! I wrote a bit about bonds today and found it interesting to find out that Buffet had called them dangerous! Anyway, don’t have much to report, I hope you’re enjoying your weekends, here are some good reads if you have some extra time:) All the best!

Why so many ETF’s are being launched @ BuildYourETFPortfolio
Let’s make a difference starting next week @ AllFinancialMatters
Half of America does not pay taxes @ Darwin’s Money
Learning how to invest in oil to maximize profits and minimize risks @ OilandGasEtfs
Millionaire Teacher book review @ Balance Junkie
S&P downgrades 34 of 37 Italian banks @ ZeroHedge
The world’s richest people adjusted for ago @ Clusterstock

Dividend Investing

18 stock picks for 2012 @ TheDividendGuyBlog
12 dividend companies with large patent shields @ Dividend Monk
5 reasons why I love REIT’s @ Dividend Ninja

Tech Stocks Investing

Linked (LNKD) beats the street @ TechCrunch
Tripadvisor (TRIP) comes up short @ TechCrunch

Closing Out A Losing Trade (TRIP, AOL)

By: ispeculatornew | Date posted: 02.10.2012 (5:00 am)

Ah well, after some early jitters and 3 great trades to start off the year, today was an awfully bad day. TripAdvisor (TRIP) which I have been very positive about and even decided to buy despite the fact that it was such a recent IPO. My basis was that the company had been around for a long time. Yesterday, TRIP announced earnings that were decent but were well below what analysts had been expecting.

Revenue jumped 30% to $137.8 million while profits rose 19% to $22 million ($0.16 EPS). It’s not great but certainly not terrible either. However, from the looks of it, most expected way better and also expected better guidance.

The impact this morning was brutal with TRIP trading down 15% or so… I thus easily reached my stop loss at today’s close and will be closing out the trade on tomorrow’s opening. That and a bad start to my GOOG/VCLK trade have taken down my average trade return down to 2.89%

Still not too bad:) But I will learn from this. I have been asked about providing more post-trade analysis and I would say that it’s difficult to draw conclusions from most trades. On this one however, I made a clear mistake that I should have known about. There is a reason why I tend to stay away from newly issues stocks. The first few days of course always have more volatility than I’d really like.

The bigger reason though is that it’s always tempting for companies to make their financial statements look better or worse in the few quarters before turning public. There are perfectly legal ways to do this and I usually prefer to wait a few quarters before making a trade to see if growth can keep up.

I Thought TRIP Was Different

For some reason, I thought that TRIP would be different. Since it was part of the already public Expedia (EXPE), I expected that the statements would provide a fairly accurate image. I’m not saying that they didn’t but it’s true that Expedia had a lot of business with TRIP so even if it did intend to provide accurate statements, it certainly makes it very tricky to do so. Was EXPE paying TRIP enough for its traffic, did that cost change? There are plenty of valid questions. Especially when you consider that in the previous quarter, 34% of TRIP’s revenues came from Expedia while that proportion dropped to 27%… not saying it’s fishy but.

I will certainly spend more time looking into all of this and will continue to provide more thoughts both here and in the technology stocks newsletter which you can join for free:

On a side note, Expedia (EXPE) which was reporting last night also ended up coming up with disappointing results, though I’m not sure how related both of those numbers are but it’s certainly possible that the entire online travel industry is suffering a bit these days.

How To Manage Risk In A Dividend Portfolio

By: ispeculatornew | Date posted: 02.09.2012 (6:30 am)

Dividend investing is more popular than ever and as I’ve said, I am convinced that dividend investing is much more than a trend because in the end it leads many investors to becoming rich.. It is an investing philosophy that is likely to do well over long periods of time. Sure, it will under perform in certain circumstances but I think most agree that we are not likely to see huge bull markets anytime soon. Much more likely are flat to down markets are the deleveraging continues and while Europe continues to deal with its main issues.

Dividend investors will tend to do much better in such markets. That being said, I think that dividend investors still need to build an optimal portfolio to manage risk as efficiently as possible. Why?

Not Optimizing Your Portfolio = Leaving Money On The Table

Basically, a portfolio that does not manage risk correctly might do better for a few weeks or even a few months but over longer periods of time, a portfolio that has good risk management will perform better, have less volatility and is less likely to have serious problems.

How Can I Manage Risk In My Dividend Portfolio?

There are a few different things that should be done when managing a dividend portfolio:

Diversify the industries that you buy: Owning a stock that is heavy in financials, commodities or any other type of industry is not optimal. You ideally have a few names in each industry in order to do well no matter how the economy does.

International Diversification: Holding a few international names or US stocks that have strong international business will help you from suffering big losses if one economy such as the US one suffers from big problems. This also gives you protection from dollar weakness and provides you with significant opportunities in foreign markets.

Monitor Your Holdings: At all times, you should monitor your holdings by doing the following:

-look for signs of weakness in sales and/or earnings
-look for any slowing down/halts/reductions in dividend payment increases
-keep stop losses that will limit the losses you can suffer on one stock. Big declines also often signal upcoming dividend reductions.

Ideally, you get rid of your weaker stocks early on in order to keep a strong looking portfolio.

How Often Should This Be Done?

I personally feel like all names should be looked at on a monthly basis (at a minimum) while things like having solid diversification and international exposure can be looked at on a quarterly basis.

How Do You Manage Risk In Your Dividend Portfolio?

Bonds – Difficult Buy These Days

By: ispeculatornew | Date posted: 02.08.2012 (5:00 am)

I rarely discuss bonds here which could be seen as surprising since it is a huge market, one that every investor ends up buying in. The explosion of ETF’s has also made it much easier and affordable to invest in as well. it has even made it possible to create fully diversified retirement ETF portfolios.

As many of you know I believe in the bucket approach to investing, I’ve discussed it more in the mailing list but basically, dividend investing and a diversified ETF portfolio are my most important investments. The ETF portfolio as you would expect includes bonds.

A few weeks ago, I had money to reinvest and noticed that I was under invested in bonds. I hesitated. Should I? Shouldn’t I?

Everyone Says Bonds Have Peaked

At their most basic, bonds have two components to their returns:

-coupons
-price variations

The big problem these days is that few expect bond prices to increase. Why? Because as a general rule, the biggest influence on bond prices are interest rates. As those increase, bond prices diminish. The opposite is also true of course. So you could say that all things being equal buying bonds is a good thing when rates are likely to decline.

Now take a look at current interest rates level. Tell me, how much further can rates go? Rates are basically at 0 except for very long term rates. The odds that one or two years from now, rates will be lower or even at the same level are basically 0%. So yes, on the surface, buying bonds these days seems like a losing proposition.

Go Back 12 Months

Of course, 12 months ago, most experts said basically the same thing. Rates were near 0, the outlook was dark but still, few expected rates to remain at those levels. Forward to today and those that bought long term bonds ended up doing great. In fact, it turned out to be on of the best investments in 2011. Why? Continued economic issues, Europe, etc.

Could 2012 Be Exactly The Same?

I guess it’s more than possible that bonds, even long term bonds will continue to do well this year. Why? Depressed economy and struggling governments remain central themes and it’s very likely that interest rates will remain depressed for a very long time. Could they go even lower? Certainly it’s possible. I would say that it’s unlikely that they could go much lower so if prices of those bonds do go up, it will not be as much.

Still… I Am Buying Bonds

In the end, the whole principle behind a passive ETF long term portfolio is to stick to certain asset allocations and avoid trying to time the market. It’s difficult to accomplish, especially in times like these where it seems obvious that I should overweight or underweight certain asset classes. In the end though, I firmly believe that over long periods of time, it is much safer to stay away from such temptations. You could say I don’t live up to this blog’s name (Intelligent Speculator) but I would argue that some investment accounts should be more aggressive and others shouldn’t. I buy bonds in the long term/retirement accounts.

What about you, are you buying bonds? Do you think it’s a bad time to buy more? I’d love to get your thoughts

Zuckerberg On Top Of The World?

By: ispeculatornew | Date posted: 02.07.2012 (5:00 am)

Last year, I made a prediction that Mark Zuckerberg would eventually become the world’s richest man, or at least come very close to it. The past week has been heaven for those who like me have been greatly anticipating the upcoming Facebook IPO. As Facebook finally filed for its IPO, Zuckerberg confirmed what many including myself firmly believed; that he plans on leading Facebook to the very top.

Zuckerberg, who is yet to turn 30 will likely officially become the 9th richest man in the world once Facebook goes public. Believe me, I will be discussing the Facebook IPO and what I think about buying the shares (most already know my opinion) but today I simply wanted to talk about Mark Zuckerberg.

The guy has been able to build one of the most important companies in the world from his dorm in Harvard and looks as determined as ever to take Facebook to the top.

It’s Not About The Money

You might think that no one becomes this rich without being driven by money, by its power and by the though of passing by Bill Gates and Warren Buffett in the top rankings. I think it’s becoming more clear every day that Zuckerberg was not about the money.

Sure, you could say that it’s easy for him now. He announced he would be making $1 per year, exactly the same as Steve Jobs who seemed to mentor the Facebook founder in the later years of his life and actually said he had a lot of respect for the guy that wouldn’t sell out unlike others he had accused of doing so (Bill Gates would be the main guy). So clearly, Zuckerberg is not motivated by money these days. He also pushed off his IPO much longer than most would have and has signed the giving pledge, promising to give away at least half of his fortune.

It Never Was In Fact

Sure, you might say that it’s easy to forgo getting a salary of a few million dollars when you’re worth billions. I don’t think ,any would have been to resist selling their stakes in the earlier years. Imagine yourself being offered millions, then tens of millions and even hundreds of millions while you are still barely able to afford your own place. Props to Zuckerberg for resisting. Just take a look at founders of other companies such as Google. By the time those companies turned public, the founders barely had a few % of the company. Zuckerberg has almost 30%!!! If you saw the “Social Network” movie, you might think that he was able to accomplish that through dishonest tactics. Some parts are unclear of course but I think that overall, what he was able to do is impressive.

Facebook’s Direction

One of the big critics that Facebook faces when being compared with Google is that revenues are much lower than Google at the same stage and revenue growth as well. That is more than fair. I will discuss my opinion on why that is soon but the basic story is that Facebook still to this day probably does not spend much time on revenues and monetization. A few years from now, I expect many more companies like Zynga (ZNGA) to build a business model centered around Facebook.

I also think one recent move by Zuckerberg, the hire of Sheryl Sandberg, says a lot about him. This woman is exceptional, well liked and a strong leader. That is one more proof that Zuck is after improving his product, not acting in his self-interest. Many leaders would hesitate to put such a high profile leader next to them.

Clearly Not Perfect

It has been well discussed that Zuckerberg and Facebook had many privacy issues, especially in the earlier times of the company. Even recently, changes were done to the company that created a stir among users. There was also that now famous “meltdown” when Zuck was interviewed about privacy concerns at Facebook. But I don’t think anyone would argue that he has gotten much better at his position and at dealing with the media, users, etc. He’s not perfect, but I would argue that he is the perfect leader for Facebook as it moves towards its IPO.

Do you think Facebook is in a good position?