What To Do With Facebook ($FB) Now…. ?

By: ispeculatornew
Date posted: 09.30.2013 (3:00 am) | Write a Comment  (2 Comments)

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homerI’m hoping that this also happens to you once in a while. You lie down to relax but then two voices start arguing. Sometimes about useless stuff but other times about trades or positions. This isn’t just me right? It seems like at least Homer Simpson has had the same experience although I’m not sure that makes me feel any better.  Anyway, moving on… not sure I want (or should) spend more time on this.

So what am I struggling with? What in the world should I do with Facebook (FB)?

If you remember, I was bullish on Facebook from the very start. Even at its IPO price, I thought it was a great buy. I try to stay away from IPO’sin the first few weeks which I did and helped me buy the stock well below that price (at 19.99 to be specific). I thought it was a steal. I bought the trade in what I classify as a long term speculative pick. As you can guess from the name, I usually hang on to such positions for some time. I don’t really have an exit point because it’s so far out in time (which you could argue is a mistake). Those stock picks have done well over time but this one is doing exceptional (by my standards at least) and is now over 150% in a year or so. As I’ve said before, these picks are bigger bets for me so I’m very happy with the return. I’m obviously a big believer and recently told my tech newsletter subscribers that I was closer to buying than selling my position. The issue? The stock keeps going up:

FB

Why is the stock rising so fast? Because it’s no longer a joke. It’s seen as a must hold, a stock that belongs to te Nasdaq-100 Index, a stock that has beaten earnings and for which broker after broker is now issuing a “buy” recommendation with target prices going higher and higher (I’ve seen targets in the 70s already)… It’s a “hot” stock to hold.  That seems to me like exactly the time you’d want to get out right? When everyone is buying, the right move is to get out?

Sky Is The Limit

My big issue is that I think Facebook can do so much more with its holdings. It has not even scratched the possibilities and while advertising (and mobile advertising) are being seen as successes, I continue to think that Facebook will get involved into much higher added value activities. So this seems very early to sell.

Take Your Gains Or Hope For The Next Apple/Microsoft?

One the one hand, having too much ego interfer with my trading is not a good thing. But I continue to believe that Facebook has just scratched the surface. I can’t really say I’m looking into buying more at these prices but it does not feel right to sell either. It might not be the next Apple or the next Microsoft that goes 10-20x higher (especially given where it started) but I’d feel a lot worse regretting having sold it off early than taking the risk of seeing Facebook become what it should; the next internet leader.

Disclaimer: Long Facebook (FB), Apple (AAPL), Microsoft (MSFT)

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2 Comments

  1. Comment by Robert Zaleski — September 30, 2013 @ 1:51 pm

    It’s simple, while it’s going up and the chart looks good you hold. When the high volume days start to be down days, then you can decide it’s overpriced and sell. For now you just check on it, see now “red” flags in the volume, and continue to know someone is buying it. When they start to sell it’ll show and you’ll still be up a bunch. Probably more than you are now.

  2. Comment by IS — September 30, 2013 @ 6:52 pm

    @Robert -Makes a ton of sense and I do manage a lot of positions in such a way but this specific trade is very much based on fundamentals so I’ll probably be paying more attention to the evolution of the fundamentals (traffic, products, revenues, etc)

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