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Thursday, July 24, 2014

Bob Brinker's Facebook Advice

Bob Brinker was not a big fan of Facebook. 

Joe from Springfield summarized Bob Brinker's July 2012 comments after the Facebook IPO when the stock was below its IPO price. 


Pete, Yesterday when I heard about the good earnings report from Facebook I remembered Brinker commenting on the IPO back on July 12, 2012. Here is what he said:
FACEBOOK IPO FIASCO...Brinker comments: In all of my years in the canyons of Wall Street, I've never seen a bigger debacle than the Facebook initial public offering....Here's a stock that came public a few weeks ago amidst more hype than I've ever seen before.....When I think back to the high profile IPOs of the past, the Apple....even to the Google....I've never seen a bigger fiasco than Facebook. The stock cracked $24 on Friday...It lost over a third of its price in a very short period of time. So in addition to raising the price, the underwriter clowns decide they are going to increase the size of the number of shares they are selling.....Facebook opened at $42 on its way to $24....Facebook has lost $34 billion dollars in market value since its IPO two months ago.....On Friday, when the market was doing very well, Facebook lost another 12%..... 
......The CEO, Mark Zuckerberg, he's a wealthy individual, but Friday, he lost $1.6 billion in stock value....He still has $12 billion in stock....I have no recommendation on this stock. I avoided like the plague on the IPO.....The P/E ratio on Facebook is double the price-earnings ratio on Google....Is that amazing or what? It's more expensive than Yahoo! which has a new CEO.....How much money are they making? They are not making any money. They are losing money. Facebook reported a net loss of $157 million for the quarter they reported on the end of the week.....In the fourth quarter of this year, there will be a release of a huge shares that will become available to the marketplace.
I doubt he will mention the turnaround of this company next Sunday on Moneytalk. Kudos to Zuckerberg.    [Originally posted here.]

I too was worried about the shares coming to market after the lockup.  I circled them in this chart I created in 2012 to get an idea when it would be safe to perhaps buy the company. 
Facebook since its May 18, 2012 IPO @ $38 
Yesterday Facebook reported earnings of $1.44 billion for the first half of 2014.
MENLO PARK, Calif., July 23, 2014 /PRNewswire/ -- Facebook, Inc. (NASDAQ:FB) today reported financial results for the quarter ended June 30, 2014. 
"We had a good second quarter," said Mark Zuckerberg, Facebook founder and CEO. "Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world."
... 
Income from operations - For the second quarter of 2014, GAAP income from operations was $1.39 billion, up 147% compared to $562 million in the second quarter of 2013. Excluding share-based compensation and related payroll tax expenses, non-GAAP income from operations for the second quarter of 2014 was $1.71 billion, up 116% compared to $794 million for the second quarter of 2013
GAAP is short for "generally accepted accounting principles."

Stock investing is a bet on the future, not the past.  Two years ago, those who bought Facebook shares in anticipation of future earnings are wearing what Bob Brinker calls "watermelon smiles" today.

I thought about buying FB in 2012 to the point I started to track its price on my chart list.    I decided to buy Hewlett Packard (HPQ) instead.  On October 4, 2012 I added HPQ to my newsletter Explore Portfolio at $14.50 and later wrote a free article recommending HPQ on Seeking Alpha when it was still fairly low:
Summary (1/10/13):  I worked at Hewlett-Packard for twenty years as an engineer/scientist in the R&D department starting as a summer intern in 1978. I have not purchased shares since working there and I sold most of them long ago at much higher prices. Now I think it is time to start buying again as there remains much value in the company, even if the mismanagement continues.

I am happy with more than a double for my HPQ plus the dividends it pays but Facebook would have done even better. This chart shows FB is up 200%, the S&P500 is up 34% and HPQ is up 132% (more than a double) since I picked HPQ over the S&P500 (More SPY) and Facebook.  Who knew?


More FB charts & Current Price Quote 

The three portfolios in Kirk Lindstrom's Investment Letter are again at record all time highs.  
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1 comment:

  1. 'Facebook Inc.' Actually Has 2.2 Billion Users Now — Roughly One Third Of The Entire Population Of Earth

    http://finance.yahoo.com/news/facebook-inc-actually-2-2-142400120.html

    Facebook reported net income of $791 million, or 30 cents a share, up from $333 million, or 13 cents, a year earlier. Excluding certain expenses, Facebook said earnings would have been 42 cents a share, up from 19 cents a year earlier. Revenue rose to $2.91 billion from $1.81 billion.

    Analysts polled by Thomson Reuters had projected earnings of 32 cents a share and revenue of $2.81 billion.

    ReplyDelete

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