New Trade: Long Facebook ($FB) & Short Rackspace Hosting (RAX)

By: ispeculatornew
Date posted: 08.26.2013 (3:00 am) | Write a Comment  (0 Comments)

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It was another good for my long & short trades with a few different things happening including the very nice rise in Microsoft (MSFT) on Friday when CEO Steve Ballmer announced he would resign within 12 months. Not sure how it feels when a stock jumps huge when you announce that you’re leaving but as someone with a long position, I was thrilled. Last week, I was a bit late updating my positions and ended up noticing that I was long Priceline (PCLN) in 2 separate trades. I’m closing out one of them today which is my most profitable live trade.

Long Priceline (PCLN) & Short AOL (AOL) currently stands at +31,97% and will be closed on today’s opening.

In its place, I will open a new trade, my last one of this year. I’ve explained in the past why opening new long & short trades near year-end made little sense to me and I’m sticking to that. So today will be my 24th and final long & short trade of 2013. I’ll have more than enough time to review how they’ve done but in the meantime let’s get to today’s trade:

Today I’m trading two tech stocks that have comparable stock prices and earnings per share. As I’ve said over and over, I’m a big believer in one of them. So let’s start with the numbers:

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Long Facebook (FB)

Not a big surprise for most of you I’m sure. I’m slightly worried about the stock’s very short term movements but overall, I continue to believe that the stock can go much higher over time and I’ve written a decent number of articles explaining why. Facebook dominates the social scene which will continue to mean big dollars for years to come.

fb

Next earnings release: October 23 2013

Short Rackspace (RAX)

I do think RAX has a decent business and will be around for a long time but I can’t think of a reason that would justify RAX trading at a P/E over 40, which is about the same as Facebook. It faces fierce competition and margins will likely decrease over time so no, I don’t think it’s a value at this level.

rax

Next earnings release: November 6th 2013

Disclaimer: Long Facebook (FB)

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