In about a week the media will be “celebrating” the one year anniversary of The Facebook IPO, the event that fleeced pikers for their coin. In my opinion, the FB ipo should be remembered as the very worst ipo in US history, crushing retail investors on a scale never seen before. The aftershocks were devastating in the social media space. Stocks like ZNGA and GRPN never recovered and people fled the sector, en masse, because it had been tainted.
Back then I was a big investor in YELP. I liked YELP because they help people make smart decisions on where to dine. Along the same vein, I like OPEN, TRIP, ANGI, TRLA, Z and LNKD.
When everyone was bailing out of the sector, these stocks were being accumulated. Truth be told, I have no regrets about selling YELP, since I was fortunate enough to sell around $27. My real anguish lies in the shares of ANGI, because I never pulled the trigger.
My custom index of social media stocks have almost doubled since last year. Have a look.
I’m not going to lecture you about missing out on an epic run or point to names that might continue to trade up. But this is a lesson we all need to remember. Just like the energy debacle post Enron or the dot com bust of 2000, when whole sectors get taken down due to bad publicity, opportunity waits in the balance. When XYZ is getting dismantled because ABC committed fraud, take a closer look at XYZ. When BP spills oil in the GOM and its shares drop like a stone, take a closer look at BP and companies affiliated with them.
There is going to be another FB ipo one day, a stock that ruins the party for everyone else. Shortly after it bombs, the media will decry foul the Twittersphere will mock anyone buying into the sector. More often than not, in my experience, money is made buying the blood of names down only because of the reputation of a peer.
Here are 6 month and 1 year returns of some of the members in my Social Networking Index.
6 month
1 year
Anecdotal support for both YELP and TRIP…
Last month I traveled with a group to Turkey and the Czech Republic. On many occasions during the trip, groups of us could be seen consulting our phones for restaurants. “I found it on ” was a frequent refrain. I was impressed. It is one thing to default to Yelp in Manhattan; quite another in Istanbul and Prague.
oops…bad html above I used brackets and the site didn’t like it….that should be:
“I found it on (Yelp or Trip Advisor) was a frequent refrain.”
Just the fact that the retail investor could get in on the $FB IPO was a big red flag.
Not only that, this was pitched to retail using UITs before it came public too.
btw, $LNN is trying to recover from its beatdown. Last earnings report was outstanding.
Like it long term.
What a joy it has been to own $JOY over the last several days.
While Linkedin is currently every headhunter’s favorite tool, it could conceivably put 90% of the professional BS-artists out of business. Its potential is still breathtaking.
I agree with the thesis, but I’d get ANGI out of the list. Compared to someone like Yelp, they’re a joke. $1.3bn valuation on $155m in revenue, slowing revenue growth, outrageous customer acquisition costs, burning ~$40 cash/year, never been profitable, bigger operating loss each year, and most importantly, widely hated and referred to as a scam by their own customers. I fully expect to see it sub $10 by end of year.