Lazy Man and Money

Buy Social Media Stocks Today?

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I’m trying to do a little less stock picking than I have in the past. I did well with it then, but now I like the diversity of ETFs. They don’t move too much and when I look at my portfolio it is still doing okay.

However, it’s hard for me to avoid the news. I need to stay on top of it to get ideas for articles to write. I didn’t much positive to write about lately, so I took a bit of a break. Hope you didn’t miss me too much.

So today, I’ve got some sales to offer you. No, I’m not going to sell you anything. I’m talking about stocks on sale.

Facebook opened up today 25% down from what people were paying for it yesterday. The could be a good deal if you wanted to hold it for a long time. It’s still worth nearly $700 billion, so bigger than the vast majority of companies. I had some shares when it was worth $50 billion, but I sold them far too early. Maybe I should get back in again.

Another social media stock that’s being put on sale today is Snapchat. It’s down nearly 20%. It’s almost at its 52-week low and about 70% off its highs. I had bought a bunch at $5 and now it is around $26. Fortunately, I sold a bunch between $60-$80. Unfortunately, I still kept some. Should I buy more back? I don’t know, but I think I’m going to wait.

What’s next? Oh, there’s Pinterest (PINS). I got lucky and bought 100 shares at $19. It’s not the biggest trade, but I sold off some at $25, $37, and $75. I still have around 50 shares worth, but it is trading back at around $24.

Buy and hold would have worked with Facebook, but it would have been disappointing with SNAP and PINS. If something goes up, I try to sell off some so that even if it goes to zero, I still made money. It’s a great plan, as long as the prices go up. I don’t walk away with a home run, but those singles and doubles add up well.

My last stock is Twitter. I don’t see how it’s always priced so low. It’s only a $27 billion company. Snapchat is bigger than that and it feels like fewer people are using that.

Nonetheless, if you are interested in social media socks, this looks like a good time to buy them. My crystal ball is in the shop getting repaired – so they may drop again tomorrow, the next day, or the next 100 days. Or maybe they recover and get back to where they were six months ago. I like buying when things are low like this because I feel there’s a better chance of them getting back there.

Of course, before you make any decision, you might want to read about why are getting hit so hard. I think there are a few different reasons such as slowing growth. Apple put in some new privacy settings and advertisers may not want to pay as much before. It also seems like some stocks are down because they are associated with Facebook. I think they’ll probably figure it all out over the long term.

Analysis of My Best and Worst Investments

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A couple of years ago, I decided to take a small portion of my retirement and actively invest it. Unfortunately, I didn’t do it in such a way that I can easily gauge performance. Fidelity’s tools aren’t all that great (or maybe it is that I can’t find them), but it is further complicated by the addition of new cash.

I’m kicking myself for setting up something so flawed. At the same time, I don’t know how I would have done much better. I don’t want to change my whole retirement structure so I can report performance on the blog (though it would be worth knowing for myself).

Like every stock-picking investment to date there’s been some good and some bad. I thought I’d review them and see what, if anything, can be learned from them.

I’m going to start with the good. It’s going to look like sunshine and rainbows… that’s the nature of covering “the good.”

  • Groupon – I dollar cost averaged at buying shares around $4 a share and sold them for around $8 a share. This is a rough estimate. I usually retain some shares in businesses that I believe in, but I just wanted to flip it and get out. I realized that I bought it for the wrong reasons. I bought it because I thought it was cheap and couldn’t get cheaper (downside protection is a common theme). It worked, but I wonder if it is more luck than skill.
  • Zenga – Much like Groupon, I bought it at a very cheap price… around $2.50 a share. I had confidence it wouldn’t go much lower because they had cash and real estate assets almost equal to $2.50 a share. It was like the company was valued at zero. It got up to around $4 and I sold. I didn’t believe in Zenga’s long-term business, so I got out.
  • Facebook – This was my biggest win. I bought shares that I dollar cost averaged at around $21.25. Unfortunately, I sold most of them at around $32. I still hold 25 fantastic shares, which at $94 is not half bad. Remember all that talk about the bungled IPO? Me neither. Remember the talk of ridiculous evaluations? Well at a P/E of 95 it isn’t cheap, but it isn’t crazy like Amazon either.
  • Google – I’m not sure this counts as part of my experiment because I bought so long ago. I bought at split adjusted $295 a share. At $665 today, it shows no signs of slowing down.
  • Apple – I loaded up at a split-adjusted $71 a share, but sold off a pile at $100 a share. It would have obviously been better to hold onto the shares, but I’ll look optimistically for a minute.
  • –

    • And now for the bad…

    • SodaStream – When it dropped from $50 to $37, I jumped in. Of course I’m smarter than the market and a small revenue miss wasn’t a big deal… especially in getting a 25% discount. Today it trades at $17. I had a few more trades in between where I made a few dollars buying low and selling a few dollars higher, but I took a sizable loss on most of the shares.
    • IBM – I bought it at around $170 and had a chance to sell at $200 a share while back. Now it is $160. I read it is Buffett’s biggest holding. I think he likes it for the same reason I do… a P/E of around 10. The revenues are shrinking every quarter, but they spend a lot of money buying back shares. They also pay dividends. IBM is in transition as it moves away from mainframes and chips and more towards cloud computing. It’s taking years and will probably take a few more, but I think it is going as well as could be expected.
    • Yahoo – I bought this because the money they were getting from the Alibaba shares essentially equaled the value of the company. I figure this gives me Yahoo’s business for free. I was up for a little while, but now I’d down about 7%. I think Marissa Mayer is very smart and I’m optimistic they’ll get things figured out.

    You’d think there would be a lot more bad in there. The “bad” is mostly in the form of lost opportunity. There are some investments that did nothing while the general market has gone up. My investment in Russia stocks is one example. My investment in Twitter is another example of money going nowhere.

    If I had to guess I’d say that it probably all comes out to market average. I did well with some and others I had essentially dead money. This reinforces what I thought all along… stock picking isn’t going to driver of wealth for me. I’m fine if I get market returns… or even slightly below market returns.

    Why would I be fine with below market returns? It’s a small amount of my portfolio. I’m learning a lot. I’m having fun. Losing or gaining a percent or two on a small amount of a portfolio isn’t going to add up to much over the long haul.

    All that said, here are the things I’ve learned about myself in investing:

    1. I Like Technology – I already knew that, but I had to point out the obvious here. Almost all of the companies mentioned are, at least in large part, software companies. (Apple is more software than most people think.)
    2. I Like Buying Cheap and getting Downside Protection – Even the big technology winners were bought fairly cheaply. It may be hard to remember it now but there were major questions about Facebook and Apple.
    3. I Let Loose the Small, Fad Companies – I viewed Zenga and Groupon as fads and I’m probably more lucky than good in making money with them.
    4. Don’t Necessary Buy What You Love – I’m a huge fan of SodaStream’s products, but that doesn’t necessarily lead to profits. I thought that their focus on healthy fizzy water and cost savings would be a winner with consumers, but I guess I was wrong. I can’t see why it isn’t in most households. I’m probably naive, but I keep holding on to a few shares hoping the general public sees what I see.

      It’s probably a very bad omen, but I did the same with shares of Palm. (Yes, I laugh at Samsung commercials showing off wireless charging, when I enjoyed a superior version of it back in 2009.)

    I think the #2 and #4 points are probably the best ones to take to heart. Even my loss in SodaStream could have been much, much worse if I didn’t buy on the dip.

    If I were to translate these insights into an investment today, I’d say that commodities look attractive. I’ve been saying that for some time only to see them lag the market or even lose money.

Ask The Readers: Is this Trading or Investing?

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It’s been awhile since I’ve given an update on some stocks that I’ve been “travesting” in. I just made up travesting as a combination of trading and investing. Previously, I had mentioned how I had this crazy stock trading idea: buying because someone else paid a lot more for it.

Here’s an example with what I did with Facebook. I bought 100 shares $26.83 after it had dropped from the IPO at $38. My theory was that a number of smart people paid the $38 price and paying $26.83 is smarter than paying $38. I bet Mike Piper could write a 100 page book on the problems with that. I did look at things like earnings, projected growth and all that. I also made the purchase because I’ve seen how addicted people are to it. When people get addicted to things, there’s a lot of money to be made and smart people (like those at Facebook) will figure out how to do it.

Facebook recovered and went to $33 where I sold off 75 of my shares to lock in gains and play with the house’s money. Then Facebook dropped and dropped again. My remaining 25 shares at $26.80 weren’t so good when the stock got to $23, $21, $19, and lower. I ended up buying 125 more shares at $22.95 and 50 more $21.09. This gave me 200 at an average price of $22.97. I held on to those as it dropped to $19. As it recovered to $28.43, I sold 100 shares to lock in more profits. I still have 100 shares of Facebook that are well in the black now. If Facebook gets to $35, I could sell off half of those remaining 50 shares to get all the money I originally invested and keep 50 shares that would one could consider “free.”

There are few different investing methods are play here:

  • Trading – I realize that at times here I’m simply taking advantage of a stock being at a lower price. However, I try to invest in relatively safe companies that I don’t see going anywhere. Facebook isn’t going to financially collapse tomorrow. I also look to see if the price/earnings (P/E) is somewhat reasonable. This may sound funny if you look at Facebook’s price/earnings on many financial websites today as it ranges between 2000 and 3000. However, it was around 70 when I started investing, and this Henry Blodget article says that it is around 50 now. I think there is an accounting reason (updated this week with its latest earnings) why the stock is technically listed at those earnings, but fundamentally the 50 number is closer to what I’ve seen reported.

    That article also covers one of the other stocks that I won’t touch due to a high P/E: Amazon. I love Amazon as much as the next person, but it will be a long time before it gets to be any kind of value. Like Blodget says in that article, “I have no idea what [Amazon investors] are thinking.”

  • Dollar Cost Averaging as Stocks Get Cheaper – As Facebook shares were getting cheaper, I loaded up with more. I didn’t get close to buying them at their cheapest when it was $17 or so, but no one is ever going to buy at the lows and sell at the highs consistently. I had bought enough to get my average price down to $23. As the stock went back up, I was able to take some profits quicker than if I hadn’t bought at the low prices.
  • Buy and Hold – For all this trading, there is still a strong element of Buy and Hold. I’m not getting out of these stocks every day, week, or even month. The buying and selling of Facebook has happened over a few months and I could keep a final stake in Facebook for years.

Whatever you call it, it’s working for me now. It’s far from fool-proof as big companies do fail. A dozen or so years ago, I probably could have implemented the strategy with Worldcom and lost a good chunk of money never getting that rebound. I’m implementing a similar strategy on a smaller scale with Hewlett-Packard right now and it is a little risky since the company is trying to figure out its identity amongst declining printer, ink, and computer sales.

Bonus Related Thought: Apple

I’ve also started this strategy with Apple. If you look at an Apple chart over the past few years it looks like a classic bubble… except that Apple’s earnings justified the rise in prices. Margins for Apple are shrinking, but earnings are still extremely strong and you can buy it at 35% less than it would have cost you in September. It has more cash than it seems to know what to do with and the P/E sits at around 10… a bargain for a technology company. Lastly, as I said to some friends recently, I have no problem in investing in companies that people get addicted to. Apple and Facebook definitely qualify.

I’ve Joined the Dark Side – Twitter

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About a month ago, I wrote a draft about how Twitter, FaceBook, and all the copycats seem to me to be ginormous wastes of time. It wasn’t too long ago, I got wrapped into instant messaging and found that I spent 5 or more hours there a day – much of it just chatting about nothing of importance.

With Twitter, I couldn’t figure out why anyone would want to tell other people that they are eating a peanut butter and jelly sandwich for lunch. That’s not the kind of thing that I want to read. Yet today, I’ve taken the plunge, you can now follow Lazy Man on Twitter.

The obvious question here, is “What changed?” I think it’s a combination of a few different things:

  • Connecting With other influential people – Jeremy from Generation X Finance said that he has been able to meet some interesting people – and not just people in the personal finance circle.
  • It doesn’t have to be all PB&Js – I realized that Twitter would be perfect for the times where I don’t have a full post – just a quick idea that’s worth sharing. For instance, I might read that ColdStone Creamery is giving away free ice cream tomorrow during a certain time. That’s perfect for Twitter. I don’t think I could stretch that to 300-500 words of something that you’d want to read as a regular post.
  • It allows me to be a little more personal – If I’m having lunch at John’s Grill, a setting in The Maltese Falcon, I could share that. I’ll try to keep these down to a minimum – it’s a fine line between that and PB&Js for many people. I predict this will be easy for me as I don’t live an exciting life :-).

I’m still having trouble getting into FaceBook. I realize it’s a chicken and egg scenario – it’s hard for me to get anything out of if I don’t put something into it. Maybe it’s just a matter of taking baby steps.

Weekend Links: Mother’s Day Edition

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Mother’s Day is tomorrow. Of course you already knew that. Since I already wrote my Mother’s Day post, I thought I’d share some great Mother’s Day songs with you. I did a little quick research and found “Mother Mother” by Tracy Bonham’s and “Mother” by Danzig. On second thought, let’s just scrap the cuddly song idea and get onto the links.