Friday, September 13, 2013

Are you going to buy into the twitter IPO

Disclaimer: I invest in the stock market. All of this is my own opinion. But I think it's relevant as most of you use Twitter.
The Facebook IPO started out at $38 and then tanked below $20
for a year. Will twitter do the same thing, or will it be the goose that
lay the golden egg? What do you think?
For those of you who don't trade stock, IPO stands for "Initial Public Offering" and is the day a stock "debuts" on one of the exchanges like the Nasdaq or the S&P 500. I leave the Dow out because the Dow Jones Industrial Average consists only of 30 stocks and they are notoriously selective on which stock is on their roster. To date, GE is the only company that belonged to the original Dow when it was first established. All others have been cast out. Just this week aluminum manufacturer Alcoa, tech giant Hewlett Packard, and Bank of America were thrown out/replaced by Goldman Sachs, Nike, and Visa (Wall Street considers Visa a tech company because they use technology to process payments).
This ticker should say "30 stocks out of thousands are surging."
So whenever you hear the radio announce that the "Dow is up 100 points" or the "Dow is down 140 points", they are saying that 30 stocks out of thousands and thousands of companies in the U.S. are having a good/bad day. I usually roll my eyes and say to myself, "I could care less about the Dow. What's the Nasdaq or the S&P doing?" but I usually have to go online for that information. The Dow gets all the news.

Anyway, there's been a variety of IPO's that have soared this year. We had Noodles & Company (NDLS) that started out at $18 a share and doubled to $36 by the end of the day. Sprouts Farmer's Market (SFM) pretty much followed that same path. But I've had my eye on some that haven't gone public yet. It's a short list of companies that I'd like to try to get in on some of the early gravy although the odds are clearly stacked against me as I have no outside connections and am just a long term investor.

Presently, I own POAGX (run by Primecap) as a mutual fund mostly represented by Nasdaq equities, I own Ford (F) Motor Company (I believe in America), and I own Texas Roadhouse (TXRH-I was persuaded by the difficulty of finding a spot in their parking lot on a Friday night). I want to balance my portfolio a little better by the end of the year by either picking up a financial (Goldman), an entertainment (Lions Gate Films), a retail (Express), or a tech company (Twitter or Square sounds frickin awesome).

With the news that Twitter has filed an S-1 with lead underwriter Goldman Sachs, my interest was piqued. A date hasn't been set, but it'll probably come by Christmas. That's just in time for me to have enough money together to buy a block of shares (100), provided they are reasonably priced. Unlike Facebook, Twitter doesn't make much money. According to the news, they generate somewhere in the neighborhood of $500 million (this compared to Facebook's $10 billion). I never bought into Facebook, because I don't like it (I'm glad I didn't because their stock tanked for a year). But Twitter's a little different. I like the whole instant message feel to it and enjoy communicating with my friends and followers over Twitter. And it fills my need for a balanced portfolio by giving me a tech stock!

So I'm asking you guys out there if you are planning on buying some Twitter stock once it goes public.

If you are interested in the other initial public offerings that I have my eye on (I google them once a day to see if there's any news) here's my very very short list:
The idea behind square is absolute brilliance. Too bad there's already
copycats taking away their market share. I guess that's capitalism.
1) Square. Square makes those little white boxes you've been seeing everywhere on iPhones, iPads, and iPods that are used to take credit card payments. The idea is simple and brilliant. That's a winning strategy in my book.

2) Smashburger. Every time my friend James comes into town, he sends me a message on my iPhone that reads "Meet me at Smash." That's how much he enjoys the taste of their burgers.Their books, however, have a story that makes me salivate. 30% growth to date and a market analysis that says the U.S. could support 8000 of their restaurants.
3) Uber. On demand driver application startup called "Uber" appeals to all the millennials. In my opinion, millennials are the most entitled, spoiled rotten generation to ever walk the earth. So naturally an application that allows them to spend twice as much as a regular taxi but comes to their location in a super comfy black luxury vehicle has to be a winner. I want to own some of this company. I was so impressed by the snobbiness of Uber that I even have it featured in my book Caledfwlch (which is filled with lots of rich snobby things like Ivy League college students wearing designer clothes and ordering limousines with their smartphones). As a side note, I even feature a video game machine that cost $40,000 and looks like an egg. Seriously, if we're going to talk about how large the 1% live we might as well go far beyond Sub-zero refrigerators and Wolf appliances, right?
The name of this super-pretentious video game pod for spoiled children is "Oculas."
The price tag will kill you though. But who cares if you're a billionaire or a crook.
I guess in our country those two things are synonymous.
By the way, if you are looking for someone to talk stocks or investments with, I welcome those kinds of conversations. I read Barrons, CNBC, the Motley Fool, Seeking Alpha, and the Yahoo Finance pages as well as watch Jim Cramer on Mad Money every day of the week. I'm also not rich. I'm just trying to take the meager money I manage to scrape together and invest it wisely in things that I think will outperform my savings account interest rate (as should you).

31 comments:

  1. Thanks for all this info Michael. I used to follow stocks before the market crashed. When I had money. I like the idea of Twitter, but I think it's going to be like FB. Come out strong, and then fall, and maybe, rebound. Unfortunately, there's new social media happening all the time. So who knows what will happen to it once it goes public. I'm truthfully, quite disgusted that the last time I was on Twitter I was bombarded with ads. There's no safe place left.

    I still believe the best stock to invest in is land. It's long or short term investment depending on what you want, and if you play it right, you can make a boat load of cash.

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  2. Don't really follow them as I have someone who takes care of that for me. Retirement is set and that's all I know. Not a risk taker anyway.
    Imagine Twitter stock will be very popular that first day.

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  3. Can't see Twitter being a very good long term investment. Food, on the other hand, always very popular.

    mood

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  4. I used to play an online stock game and I always lost..so I would never consider buying them individually as I obviously have no clue what I'm doing.

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  5. The dow is the biggest, though if you were an investor it doesn't really matter which place it belongs to.

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  6. I'm not on Twitter and if I were it would, like Facebook, no longer be cool.

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  7. They were talking about the Twitter IPO on Marketplace Morning Report this morning. Their revenue is apparently under 1 billion. That seems crazy!

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  8. I don't know anything about the stock market but it's something I've been wanting to educate myself on and possibly get involved with. This was interesting and helpful to me! I think I would buy the Twitter stock too, I like it better than FB.

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  9. I read on Mashable or somewhere that a lot of teens like Twitter better than Facebook anymore because apparently they (like me) get annoyed at all Facebook's tinkering and other nonsense. Also I suppose since everyone's grandma is on Facebook now it's not cool anymore. Still though the only way Twitter can make money is through ad revenue. Do you ever click on promoted Tweets? I sure as hell don't. At some point maybe companies will figure out that you can do more with a free normal Twitter account than paid Tweets.

    Anyway, my 401K has been slightly higher since you recommended I dump the bonds so there you go.

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  10. Jim Cramer has used Mad Money to promote friends and try to manipulate stocks he has a personal interest in seeing do well in the past. He might do his best 98% of the time, but that's not enough for me, I'm always going to distrust him.

    I'm not interested in Twitter going public, I'm going to be flooded with spam as soon as someone figures out how to 'monotize' it and I'm sure I'll quit in frustration. Youtube has suffered, in my opinion, as a result of the attempt to make money from its services.

    That said, it'll probably do really well. But the whole going public thing for high profile companies tends to only make me depressed. That initial offering at a decent price is going to sucked up by the real powers that be.... I won't be able to get my hands on a stock until its already gone through the roof.

    Google tried to minimize that borderline criminal behavior when they went public, and they couldn't do it.

    Ugh. I'm getting upset even thinking about it. Good luck, I still believe a saavy investor can do really well, but IPO's, high profile ones especially, are too well controlled for people like me to see success getting involved.

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  11. @Rusty: I'm well aware of Jim Cramer possibly being a crook. But just like anything, you have to look at the information. The only advantage the small guy like you and I has over the big guy is the ability to wait things out. When I buy into stocks, I read all of their balance sheets. For example, I chose Texas Roadhouse because they've reported profits in 14 consecutive quarters. That's pretty darn steady. Their dividend is good too and they have a great plan for expansion. Ford under Mulally has done excellent as well. Their Ford Fusion stays on the new car lot only an average of 10 days. The Ford F-150 is selling like hotcakes. Europe and China sales are up 50% from last year. Every quarter thus far this year, they've exceeded expectations. Rusty, I think it only hurts you to write off the whole stock market. It's the only game in town right now if you want to make a little money. And as for the IPO, I know I won't get in at a sweet price. The stock will probably double in the first five minutes and be at that height for the remainder of the day. But I think if I get in when it opens, even if it is double the price, then the market will correct and it will slowly creep up over time. But I've obviously got more thinking to do. Twitter doesn't make much money so it depends a lot on how cheap it is when it is available for sale.

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  12. @Julie: It's surprisingly easy to get into the stock market. Setup a Scottrade account (with a referral from someone like me you get three free trades). Load your account with some starting money (maybe $1,000). Then pick and choose a stock. Read everything available on stocks that catch your interest. Narrow down the choice and keep winnowing down until you have one that you know everything there is to know about it and click on invest. You want to aim for a portfolio that (more or less) has five stocks in it. That's all. Each one should be in a different sector for balance. And you must follow the news every day on that stock. If something gives you a trigger to sell, you've got to be ready to do so. Never buy and forget.

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  13. Like Julie I'm not knowledgeable about the stock market. But your post has me learning quite a bit and I think Uber and Square (but watch out for the copycats) are great investments.

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  14. I think it will almost certainly high and then drop. Anything that is highly anticipated will do that. It probably has a higher potential than FB to climb back up, though.

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  15. Thanks for all this info Michael. My brother is into stocks and he takes care of it for all of us. I am not too much of a risk taker.

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  16. Very interesting, Michael. I haven't done anything with the stock market yet, but it's something on my radar.

    I'm fascinated by FourSquare. Everybody has it now.

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  17. Hey Michael - Your right, I can't write off the whole stock market. My dad spent years as a broker, worked on Wall-Street for a short time, and enjoys trading as much as anyone, although I don't have anywhere near his expertise, I still like investing too.

    My real issue is with IPO's and how they are handled though. Not with trading general. Although, I do know a guy that has made a fortune writing trading software (mostly just creating algorithms for the programmers to use). And a lot of the get rich quick stuff is created by software, and has little to do with the fiscal soundness of the businesses that are being traded.

    Anyway, I suppose I was just looking for an excuse to rant earlier.

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  18. Er, that isn't to say that you said anything about getting rich quick... don't really know why I brought that up.

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  19. Anything pays better than savings account. I have to think about Twitter. I don't like twitter to use but that doesn't mean it won't be a good investment.

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  20. That last device looks well dodgy!

    And no, I don't buy stocks. Got a friend in London who does though. He works in nano-second fast trading. It's crazy ass shit!

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  21. I had no idea Twitter was going to do that. My husband is more of a stock guy than I am. Thanks for the update and have a great weekend!

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  22. I'm not into stocks, but I know someone in my family who is, and will pass on all this post.

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  23. Thanks for the IPO tips, Michael--I'll keep my eye on them. But personally I'd never invest in Goldman Sachs because they're evil.

    I don't have the money to invest, though considering what interests are being paid on Money Market accounts I might as well invest in the stock market. I sometimes do fantasy investing, which for me means looking at companies I'm interested in (and agree with ethically) or that I just get a hunch for. I wish like hell I'd invested in Tesla last February or so when I decided I admired the company and the nearby showroom for Tesla seemed to work like porno on male customers. The stock has since quadrupled. I also wish I'd invested in Ulta (a real chick pick) simply because I shop there and saw way back how popular that chain is. Now the stock is up about 50%.

    But wishing isn't the same as investing, so I'll likely take a risk and make very humble investments in the near future.

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  24. I'm impressed, Michael. Keep on this investment track; you might want to invest in some bonds and money market funds as well for a little more safety.

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  25. I should introduce you to my father. He's into all of that stuff.

    I remember seeing something about how everyone got into the stock market because they were sure that was the way to make a lot of money in a hurry. And then the market crashed in 1929... And then history repeated itself.

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  26. I don't tweet. The only retirement I buy into is what is forced by the gov't (SSI) and my CalPers account as a California public employee. My ex invests into mutual funds for his retirement, and some days its a lot, others not so much.

    When I'm old enough to retire (sooner than I'd like to admit) I just hope its enough.

    .......dhole

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  27. Interesting post. Is there anything you don't cover? We didn't do so well with Facebook, so I worry Twitter will be the same disappointment.

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  28. remind me to come onto you if you become rich thanks to these investments :P

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  29. I'd personally steer clear of Twitter as an investment mostly because there are so many ups and downs with social media companies, and I don't like taking large risks with money. Sometimes those risks do payoff though for the people willing to take them.

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  30. This is an interesting article to be read…. I think if I plan to invest in twitter then I would be going to buy. Keep on writing such articles…
    source: TWTR

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