The Current State of Social Media Stocks

Post YELP, TWTR and FB earnings, the sector is being marked for dead. All of the people who make believe they know something about stocks are announcing victory over social media–insisting that the bubble has popped and anyone long is a headlong idiot.

These people are betting against the internet.

At any rate, I’m not a fan of buying high growth at any cost. For example, TWTR, BABA and FB are all trading above 20x sales. I have zero interest. I own FB from $32, so I will not sell it here. But, on the other hand, I am certainly not buying it after this minor pullback.

All jokes aside, this is the premier part of the tech sector, the area with the highest growth. So when will some of these stocks become buys, and which ones are worth targeting?

My favorites are YELP, TRIP and Z. But let’s have a look at the sector, revenue growth, p/s ratios and YTD returns to get a clear view of what we’re looking at.

(Stock, Rev Growth, p/s ratio, YTD return)

TWTR, +124%, 30x, -32%
BABA, +46%, 26x,
FB, +60%, 21x, +39%
Z, +68%, 17x, +29%
WB, +105%, 14x
LNKD +47%, 13x, -7%
GRUB +74%, 13x
YELP +67%, 12x, -16%
TRIP +31%, 11x, +5.5%
CTRP +38%, 7x, +14%

Clearly, as you can see, this is hardly a sector on fire. It’s been under fire all year long and valuations are coming in fast. With share prices lagging and growth still soaring, many of these names are setting up for big runs in 2015.

I will be making some minor adjustments to my long term portfolio, which is listed–in full–inside The PPT. A few broad strokes: I am reducing tech, reducing basic materials, reducing healthcare, reducing industrials, upping finance, upping utilities, upping staples.

I know that sounds somewhat bearish–but it’s not. I am simply overweight those industries and need to adjust the weightings. Part of the reason is outperformance in some of my holdings, like GILD, PANW, N and JAZZ.

But, make no mistake (extra Bush), there is a new reality on the ground, one of cheaper fuel prices, which disproportionately helps certain industries, while being punitive to others. Going down the stretch, in a year that has been punishing for me, I am not interested in tossing hail marys, in order to bolster my pride. The fact of the matter is, the losses I incurred are behind me and I am not managing to redeem myself, but to do the best possible job with the market that is in front of me.

I woke up the angriest man in the world. I am sure none of you are angrier than me right now. I don’t have a reason to be mad, per se. It’s more of an overwhelming feeling of frustration (No Freud), brought on by a culmination of separate events that has led me to this dark hallway of mental violence.

I see all of the fucking geniuses on StockTwits are predicting GPRO to miss earnings– and get summarily flushed down the toilet today. These are, without a doubt, some of the dumbest people I have ever had the displeasure of not knowing. These same animals, genuine thieves, were spreading idiotic rumors about TRN last week. There isn’t anything wrong with StockTwits. There is something wrong with the human race.

Look, I am not your teacher. We are peers. We both play this asinine game together and hope to come out ahead. There are too many experts in this world, people trying to tell others how to eat, sleep, work, fornicate, etc. I am especially amused to hear people on the donut line lecturing others about success and how one should achieve it, as if they knew the first thing about it.

Speaking of success, Dr. Benjamin Bernanke was the most successful Fed chief in the history of the Federal Reserve. He literally saved western finance and should be revered as a national hero. Instead, the slime-balls of this country deride him and make false claims that he destroyed the dollar and how QE fucked up the economy. For the love of upside surprises, these scandalous lies, these perversions of the truth, are too much to bear. If I listen to any more of it, I will snap and end up in an asylum.

There isn’t any inflation and the dollar is doing just fine–fuck you very much. The President of the Cleveland Fed is tire-changing retard. QE is here to stay–because it’s all we have.

Regardless of what happens today, post Yellen, the market will demand moar QE. Without it, we’re simply a bunch of assholes getting sucked into the deflationary vortex of nothingness, which was brought on by the failure of the banks in 2009 and still persists to this very day.

Getting long oil, as a play on reflation, might truly be the best trading set up of 2014. Oh, I am also long GPRO because 99% of the people cannot be right about them missing earnings tonight.

All of the stories you’ve ever read about in the journal of men who’ve made fortunes in the market revolve around a singular trend: buying stuff no one else wants for pennies on the dollar, then selling it later on when everyone wants it for absurd premiums.

Using the powerful screening tools of The PPT, I put together a list of under performers that might offer outsized gains. Or, they might wash away with the sands of time. It’s high risk/high reward, son.

NOTE: Debt/equity levels above 4 suggests the company is in dire straights, financially. It’s not the entire picture. But, generally speaking, companies with high debt/eq ratios and dead stock prices are heading towards $00.00.

(Stock, 3 yr return, debt/equity ratio)

WLT, -97%, 20x
MCP, -96%, 4.6x
ANV, -94%, 2.5X
AVEO, -94%, 0.28X
SWSH, -94%, 0.09X
ANR, -91%, 7X
DNDN, -91%, 3.6X
WAVX, -89%, 0X
IAG, -89%, 0.7X
TRGT, -87%, 0.01X
ONE, -86%, 0.9X
CLF, -82%, 2.4X
CETV, -81%, 2.6X
WPRT, -80%, 0.2X
ARO, -78%, 0.6X
JCP, -77%, 2.3X
BTU, -76%, 2.1X
KEG, -76%, 1.4X
FRO, -74%, 7X
ARCO, -71%, 0.9X
PWE, -69%, 0.9X
EXK, -67%, 0.08X
PRGN, -67%, 2.3X

Let me know if you have a preference. For members, the full list is here.

I post a lot here, mostly for entertainment, in order to get a few laughs out of the plebeian hordes. Every so often, I will post something that should be saved, not because I wrote it and I am awesome and amazing (extra Mrs. Fly). I am merely a cog in the giant wheel of speculation. I am not the best investor, or the worst. However, I am keenly aware of my surroundings and have enjoyed a modicum of success, greater than most market mavens.

I wrote this on October 10th, into the teeth of the recent sell off. It will always be relevant.

Bear in mind, the day to day operations of this market are hard to wade through. Nevertheless, if you’d simply avoid the classic pitfalls that have ruined men for the past 200 years, investing can be very rewarding.

Here are a few.

1. Invest in companies with market caps greater than 2 billion. And, if you’re gonna invest in small caps, make it a minor portion of your portfolio.
2. Diversify amongst all principle industries and do not concentrate in any one sector, no matter how hot it is.
3. Avoid leverage.
4. Separate your trading money from investing money.

The last one is probably the most important. Get your foundation right and you can build a strong house that will last for decades.

With the proceeds from TNA and MBLY, I bought GPRO.

It isn’t nearly as expensive as some of you fire hydrant lickers like to say. Ahead of ski season, I like it.

With oil dropping and Americans saving $100 billion from lower gas bills, I reckon it will be a splendid holiday season for premium electronic manufacturers, like GPRO and AAPL.

I bought this on 10/2 during The PPT oversold period at $62.21. It ended up being correct, as always.

UPDATE: I sold out of MBLY too.

Yesterday, the good man from the television, Dennis Gartman, informed our good persons that Fusion energy is here and that “the oil (barrel) would go the way of the whale oil, completely extinct” from the public landscape. He furthered “oil should trade down DEMONSTRABLY over the course of the next few years,” meandering about the cemetery of antiquity at around $10 or much, much less.

All of your cars, homes, and airplanes will be powered by Fusion technology. I am sure some of you outlier types were unaware of this circumstance. You should thank Mr. Gartman for informing you of suchness and offer him to eat at your summer cottage, for what will surely be wild eyed entertainment–emanating from this flair for the obscene.

With oil already whistling past the graveyard, one must contemplate how this fusion technology can be used by persons, such as ourselves. I imagine the Dominos Pizza Organization will be delivering their tomato pies via space aged vehicles. And, moreover, GM and F, as well as all of the traditional auto makers, will need to take wrecking balls to their factories, in order to retool for this new technology and engines that run on it.

Kiss your local Wawa goodbye. Gas stations are no longer required.

And, the next time the fuel truck stops by the house to provide you with oil for the winter, tell him to “fuck off, I have fusion technology.”

As the Bakken, slowly but surely falls into the vortex of despair and agony, thanks to our friends the Saudis, the same chaps who demolished our antiquated World Trade Tower–FREE OF CHARGE; other companies profit from this sea-change event.

What are we talking about here, you ponder? What the fuck is going on?

I will tell you.

Gone are the days of energy independence, the dream of having oil barrels in our backyards as the kids run about the fields slapping each other in the faces with hydraulic pumps. For a moment there, the Saudis really had us going. We ramped up production, excluded ourselves from the cartel of OPEC, and advertised our manifest destiny on Fox News, exclaiming “NO MORE RELIANCE ON MIDDLE EASTERN CRUDE.” After all, those people are head-choppers and airplane crashers. Civilized society doesn’t have a place for them.

We sent our brightest engineers to the Permian Basin and the Bakken to extract this oil. We bought the land from the people who owned it for billions and began to build an empire built upon the very minerals in the earth. The only problem with this business plan of ours was the cost. We needed oil to remain upward of $80 per barrel in order to sustain the sort of gung-ho, America rocks, attitude in these hard to drill areas. What good is oil independence if it means it must be expensive forever? A riddle wrapped inside of a puzzle, inside of a fag-box, no doubt.

We got lured in real good, a giant snare was set, and the dreamers took the bait.

Now the rug is being pulled. The lower crude goes, the faster our oil production will decrease, the wider the smiles on the faces of our friends, the Saudis.

If oil trades to $50, rest assured, 70% of the oil stocks you see on your screen will be trading down more than 50% from today’s current prices, if not more. We will firmly be placed into the prison cells with the camels, for eternity, and our economy will reel from the investment losses realized from the bust once known as “The Bakken Shale.”

The city of Destin will become a ghost town and we will never talk about it again.

I write this to you, on this very night, not to scare you. Instead, I write this to tell you what our true destiny is and how to profit from it.

Your sons and daughters will all be employed by this company and you will rely upon them for sustenance and comfort.

BEHOLD the next great boom in the American story: THE DOMINOS PIZZA CORPORATION. May their delivery men live long and prosper, ushered to and fro their destinations at exceedingly cheap rates.

The Goldman Ballsachs downgrade of the entire oil sector really took its toll on today’s sentiment. I fully expected the market to be rough-housed, to the tune of -150 or so. However, after coming back from my journey, I see the market is almost unchanged.

Surely, you didn’t think the oil and gas sector would rebound in the face of their abhorrent commentary, did you? You’re gonna have to wait for tomorrow to see that. In the meantime, the market can lend itself a hand here by simply defecating onto the heads of those who bet against it. It should behave like a lion and bite the heads off the zebra who brays, spilling its cheap blood on the land so that crops can grow.

I am deeply saddened, as well as chagrined, to see my CLR position getting manhandled in real time. Alas, this is the price we pay, lads, for speculation. There will be good times and then there’s now–the days when you wonder why you got into this tomfoolery in the first place. Sure, a person of my intellect, a man amongst apes, could’ve done anything short of testing roller coasters (I do not like heights). But I remain here, in the parlour of Satan fighting the good fight, punishing those who try to destroy America.

In summary, the Goldman Ballsachs corporation had merely tossed a broken chair in the way of my speeding calash. I will have my horses kick said chair to the side of the road and eventually eat it. My final destination is the cemetery, where I fully intend to dig up and dance on the skulls of my many enemies.

https://www.youtube.com/watch?v=3DkDpbuRc78