Long Facebook ($FB) & Short Blue Nile ($NILE)

By: ispeculatornew
Date posted: 07.01.2013 (3:00 am) | Write a Comment  (0 Comments)

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Today I’ll start off by closing 2 stock picks, one is a loser and the other is a big time winner. I’m a big believer in Apple (AAPL) as many of you know so closing a losing trade on that name isn’t much fun. It’s not terribly surprising though when you look at Apple’s stock. So here are the stock picks I’ll be closing out on today’s opening:

Long Apple (AAPL) & Short Blue Nile (NILE) -32,65%
Long Google (GOOG) & Short Demand Media (DMD) +51,54%

Overall it’s obviously a solid result and things are looking much better these days for my 2013 tech stock picks. It’s not excellent but it’s decent which is a start I guess! You can always take a look at my results here:

My 2013 Tech Stock Long & Short Trades

This morning I will be opening  on 2 stocks that I have strong opinions of. I’ve obviously been a believer in Facebook (FB) for a long time and while I have expressed a few more doubts, I do still think it’s a solid stock to own. On the other hand, the stock I’ve shorted more than any other will be part of one more trade. Before going further here are the numbers on these two companies:

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And the quarterly Y/y revenues growth:

FB Revenue Quarterly YoY Growth Chart

FB Revenue Quarterly YoY Growth data by YCharts

FBLogoLong Facebook (FB)

Facebook has not been enjoying the sky high growth that some expected. More worrying to me as I wrote about a month ago is the fact that the company has not really moved beyond “ads” as a source of revenues. That being said, I do still think that its a good buy at the current P/E ratio, especially when you compare it with a company such as Blue Nile which faces a lot more competition and has never come close to Facebook’s growth. I do think Zuckerberg’s focus remains very strong and while there are many competing social networks, Facebook remains the default one for the vast majority of internet users.

FB

Next earnings release: July 26

003_blue_nileShort Blue Nile (NILE)

Blue Nile has always traded at fairly high P/E ratios. It has gone on for years and years and I still fail to understand what could possibly justify it. I just don’t see it. I have just started reading a new book about security valuation which will maybe help me:) I doubt it though. The company is simply unable to ramp up sales and margin quickly enough and I expect this to continue. I did fail trading it earlier this year but I’m confident that this time will work out better as it has in the past. Here is a chart of earnings per share in recent quarters for NILE:

NILE EPS Diluted Quarterly Chart

NILE EPS Diluted Quarterly data by YCharts

NILE

Next earnings release: August 2nd

Disclaimer: Long position on Facebook (FB)

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