Facebook IPO: why I didn’t buy

May 21, 2012 By 25 Comments

There was a lot of hype about Facebook becoming a publicly traded company. The stock went public last week, and leading up to the big event there were endless speculations about its potential. Buying stocks is definitely on my top-10-favorite-things-to-do list, but I had no intention of every buying any shares of FB for one big reason:

I hate Facebook.

I didn’t use it for years because I hate it so much. The only reason I have it now is because I have to in order maintain our Facebook Page for work. Having a great affection for a company is not always one of my reasons-to-buy their stocks, but it certainly helps. Outright loathing a company is definitely a reason-NOT-to-buy for me though.

That said, I could have been persuaded to by Facebook if it was a better stock. After all, it fits my personal criteria of being a company I know and understand, which is my primary foundation for stock-picking. However, in addition to me hating it, Facebook is lacking a bit more in order to make it an appealing investment to me:

1) it’s too new, both as a company and a stock. Facebook has been a huge success and it has a great business model, but it’s only been up and running since 2004. Is Facebook going to withstand the ages the way brands like Coca-Cola, Proctor & Gamble, and Johnson & Johnson have? Maybe, but maybe not. At this point, Facebook still needs to prove its staying power to me.

2) it doesn’t pay dividends. I don’t buy dividend-paying stocks exclusively, but I like them when I find them. Healthy payments from a company with a history of continuously increasing dividends over a number of years will entice me to buy a stock. Because I’m young, I invest for the long-term so if I’m going to hold a stock for a number of years, I appreciate getting a small regular pay-out for it.

3) its first day disappointed. Facebook was kind of a bore on opening day, closing only $0.61 above its opening price (for comparison, Google rose $20 the day it opened), which suggests the stock was over-valued. While the first trading day doesn’t necessarily set the tone for a company’s trading lifetime, I would personally feel more motivated to get on the bandwagon if FB had been a runaway stock market success. Instead we’re all wondering where is it going to go from here? Which brings me to…

4) Where is it going to go from here? Facebook is the leader in social networking, but is this sustainable? Is it always going to hold its place as king of our online social web? Other social networking sites have risen to great heights and then burned out (ie. MySpace — who uses that anymore?) to be replaced with something else. I think Facebook could get old, and users might abandon it for something new — especially since they’re continually pissing everyone off with privacy policy adjustments, etc. Like any company, it will only succeed if it can  retain current customers and grow by finding new ones — does Facebook have that potential?

Do you use and like Facebook? Did you buy any FB shares? What is your expectation with the Facebook IPO?

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Stock investment wisdom from my grandpa

March 5, 2012 By 13 Comments

“You have to buy stocks the way you would a nice suit. Pick a high-quality, well-established brand — then wait for it to go on sale.” – my Opa.

Everyone knows investing in the stock market is about buying low & selling high, though intuition tends to make us act the opposite: if stock prices are down, we feel motivated to sell because we’re losing money and if they’re going up, we feel motivated to buy more because they seem to be money-makers.

I take my Opa’s advice. I actually wish I had more money to put more to use under his direction, but sadly I still don’t have a lot of cash to play with. Nevertheless I implement his strategy by watching big name companies, and waiting for a good price to buy. I watch the shares of many companies you might be familiar with:

Coca-cola, Pepsi, McDonald’s, Proctor & Gamble, Johnson & Johnson, Black & Decker, Kimberly Clark, Target, Mattel, Disney, Microsoft, Apple, Google, Telus, AT&T, Shaw, Netflix, and well, the list goes on. Some of these I already own, some of these I’ve bought & sold, some of these I’m waiting to go on “sale”, others I’m just watching and waiting for a collapse (or a revival) out of pure curiosity.

I keep some labor intensive spreadsheets when I’m bored, but generally I just check up on stock prices of these companies on my iPhone to see how they’re doing. After you watch a company for a few months and see the fluctuations in price, you start to recognize when is a good time to buy in. One of the main reasons I contribute to my brokerage account monthly is just so there’s ALWAYS some money in there so I can grab a good stock at a good price should the opportunity arise.

I haven’t been investing very long, but I’m amused to see my mock portfolio strategy has intensified rather than died off now that I’m using real money. For some reason I expected I would only watch the stocks I own, but I find I’m more interested in the market than ever.

Do you invest in the stock market? Do you have a strategy or follow any advice? Furthermore, is my Opa awesome or what?

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