So Facebook has listed and is trading 10% below its listing price of $38. The three key lessons here are simple: never believe the hype - always do your own homework. It does not matter how much you use the company and like its products; what matters is the old fashioned things like revenue, profits and future prospects. Thirdly, there are no sure things in the stock market; yes LinkedIn popped some +84% on listing day, Groupon +40% and Pandora +25%, but Facebook only managed a 10% pop on listing and closed down on the day.
I suppose the question is now where to from here for Facebook, and the answer is we have no idea. Having 900 million users is impressive, but a Facebook killer could be launched tomorrow or maybe we'll all still be using Facebook from our old age homes! Either way, I am not a shareholder and don't intend to be one.
In the past week Keith Mclachlan continued to educate us on valuation models with a webinar titled Other Relative Valuation Models (PEG, Price-to-Sales, dividend yield, Price-to-Cash Flow and a number of industry specific ratios). He has done theory and practical videos on PE, Price-to-book and EV/EBITDA, and this video covered the others out there. As always it was a great learning experience.
We are taking a breather in the week ahead as I’m off to Durban and take my nephew and niece to the Royal Agricultural Show in PMB. However we will be uploading a video on the different types of shares (issued, authorised, buy backs, treasury etc.) by late Tuesday.
Over at MaudeStreet.com we uploaded a great interview between Keith and I on traders’ mistakes, covering position size, exiting, expectancy bias and more. You'll find it here.
Wednesday 6th June at 1pm - Investment clubs
Wednesday 13th June at 8pm - Sarting in FX
Monday 2nd July at 8pm - Trading commodities without currency risk
Other Relative Valuation Models
Four Important Candlestick Patterns
Investment clubs are a great way to pool not only knowledge but also funds, and they provide a way to learn while you invest. Bruce Whitfield had a great interview on the subject with Warren Ingram and you can listen to it here. We will be doing a full webcast on investment clubs on 6 June and you can book to attend here.
All the best
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