This is the latest in a series of video interviews in which Pat McKeough will give his investing advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. This week, the topic is the decision of Internet phenomenon Facebook to start selling shares to the public. The intense media limelight surrounding this initial public offering is just one of the things that should make investors cautious, in Pat’s opinion.
Q: Pat, a lot of people are excited about the fact that Facebook is going to start selling its stock to the public. Do you think people should buy it?
Pat McKeough: Well I’d say that’s a good question. Facebook has a huge following and many people have high expectations for it. It’s entirely possible that it will shoot up on the first day it sells out, but as a company to invest in, at the price they’re selling it for, I think I’m going to take a pass, and that’s what I advise other people to do.
I can tell you that our system, we tend to downgrade or stay out of, companies that are in what we call the broker/media limelight. When the brokers and media are talking about something favourably, it tends to raise investor expectations. And this one has extremely high investor expectations. It may not be able to live up to those expectations, and when that happens, there can be very stunning downturns.
Another risk factor is that it is a new issue after all, and a new issue comes on the market with a great deal of broker and media attention. And that fades, it evaporates, or at least reduces to a great extent after the new issue sells out. So suddenly if you quit seeing the name of your stock in the paper anymore, or as much, you may be tempted to dump it.
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Looking a little further on, it’s a great concept, obviously it’s done wonders, but I’m not so sure it’s going to be staying as long as many people think. Many people I talk to are kind of sick of Facebook. You know, they’re somewhat older than the typical Facebook customer.
Another problem with Facebook I would say is that the guy that created it is a genius, but he’s not an experienced business genius. And the way the thing is set up, he has carte-blanche to do what he wants. And he is probably, the nature of the thing being what it is, going to make some mistakes. So my feeling is, no, I wouldn’t buy it, I wouldn’t recommend it. It’s certainly not the worst thing out there, but it’s not something I’m going to recommend.
COMMENTS PLEASE
Do you like Facebook, or are you tired of hearing about it? Based on your own experience of it, do you think it is growing in popularity and influence among people you know, or are they losing interest? Let us know what you think in the comments section below. Click here.
Comments
Karl
Facebook is just a lot of noise and a big waste of valuable time, as are most of the social media platforms. I am really not interested in what everyone is doing every minute of the day, or seeing all of the unfocused shots of their booze ups, or how many “friends” or “likes” they have. Worse still, it just provides another avenue for being bombarded with more unwanted marketing b.s.
This analysis from Mr. McKeough seems to make great sense to my humble opinion. On what criteria did they fix the launch price? On what criteria did they issue the number of shares? There is only one possible answer: get the most for Facebook. Total amount to get for is the only objective. Like any other company. There is nothing bad with this but it could easily hit a downturn point at any unexpected moment in such current troubled market.
A.C.
I agree with you. Facebook is much too hyped up. I do not have a facebook page. If as the sages say silence is golden then anonymity is platinum. So many people put so much personal information on facebook. I get the impression sometimes they are trying to convince others what a wonderful life they have. A large percentage post a whole lot of drivel and twaddle that nobody really cares about. I am sick of it all and most people I know are weary of the whole thing. The rest justify its existence and hence their time wasting reading all the nonsense about other people’s lives. Those people wish to seem “hip” and “Cool”.
I have better things to do with my time…and my money. Once the hoopla is over I think the stock will nosedive! I prefer to put my dollars into proven businesses.
I don’t know why people post here who don’t even use Facebook. That’s like someone saying “I don’t know what the big deal is with Apple. I don’t even own a computer.” If you have never used Facebook and see what it’s all about, you are hardly in a position to have a view on it’s value.
Facebook is huge. Millions use it all the time and it’s very profitable. To write it off makes no sense. Is it worth the offer price? That’s another question. Pat has his view, which makes sense, but please, don’t base your investment decision on the notion that Facebook is just a stupid waste of time. That seems very misguided.
Facebook’s continued value to investors hinges on it’s ability to stay on the forefront of social norms and information on the web .. they seem solid now, but it will be interesting how they fare as the years go on
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Facebook is just a lot of noise and a big waste of valuable time, as are most of the social media platforms. I am really not interested in what everyone is doing every minute of the day, or seeing all of the unfocused shots of their booze ups, or how many “friends” or “likes” they have. Worse still, it just provides another avenue for being bombarded with more unwanted marketing b.s.
This analysis from Mr. McKeough seems to make great sense to my humble opinion. On what criteria did they fix the launch price? On what criteria did they issue the number of shares? There is only one possible answer: get the most for Facebook. Total amount to get for is the only objective. Like any other company. There is nothing bad with this but it could easily hit a downturn point at any unexpected moment in such current troubled market.
A.C.
Hello Pat
I agree with you. Facebook is much too hyped up. I do not have a facebook page. If as the sages say silence is golden then anonymity is platinum. So many people put so much personal information on facebook. I get the impression sometimes they are trying to convince others what a wonderful life they have. A large percentage post a whole lot of drivel and twaddle that nobody really cares about. I am sick of it all and most people I know are weary of the whole thing. The rest justify its existence and hence their time wasting reading all the nonsense about other people’s lives. Those people wish to seem “hip” and “Cool”.
I have better things to do with my time…and my money. Once the hoopla is over I think the stock will nosedive! I prefer to put my dollars into proven businesses.
Regards
Mark
I don’t know why people post here who don’t even use Facebook. That’s like someone saying “I don’t know what the big deal is with Apple. I don’t even own a computer.” If you have never used Facebook and see what it’s all about, you are hardly in a position to have a view on it’s value.
Facebook is huge. Millions use it all the time and it’s very profitable. To write it off makes no sense. Is it worth the offer price? That’s another question. Pat has his view, which makes sense, but please, don’t base your investment decision on the notion that Facebook is just a stupid waste of time. That seems very misguided.
Facebook’s continued value to investors hinges on it’s ability to stay on the forefront of social norms and information on the web .. they seem solid now, but it will be interesting how they fare as the years go on