Sadly, investing in Facebook right after the IPO is a case study in what not to do. It debuted at $38 dollars a share and is now at $19.54. So, hypothetically for someone who invested $10,000 in a long position lost roughly 48.5% or $4857. The question now is why was this a bad investment and how can folks make a better choice in the future. Please note I'm not saying that Facebook as a company is doomed. Hopefully they will do well in the future.
Data is your friend when it comes to investing. How can you use it to improve your odds?
- Options: I do not know for sure but I am guessing that there was little or no options data available prior to the IPO. http://finance.yahoo.com/q/op?s=FB+Options is a good example of call and put data. If you are going buy stock, or take a long position, does it jive with the call options volume and the call versus put volume? It's okay to "fight the market" if you have good reason, if not do you really want to take that gamble?
- Investors.com: Investors.com is a great resource. Their CANSLIM strategy is pretty good. The do some good ratings on stocks too. Get a free trial and try this http://research.investors.com/stock-checkup/nasdaq-facebook-inc-cl-a-fb.aspx . To get to the point, they rank FB quite poorly. They use a variety of fundamental and technical indicators and have good charts as well. They generally warn folks to stay away from IPOs also.
- Analyst opinion: http://finance.yahoo.com/q/ao?s=FB+Analyst+Opinion is an example of analyst rating data for Facebook. The average rating is in the hold territory so take this with a "grain of salt". However, this is good to consider again because it can affect stocks and do you really want to "fight the market"?
- Chart action: How does the stock chart look. FB's chart above is a mess. It is way below the IPO and below its simple moving averages also. Google finance and Finviz.com are good resources for charts and other data (insider transactions / ownership, etc...)
- Etc...: There are other things that you may want to consider based on your risk tolerance, strategy, etc... The list above is not meant to be exhaustive by any means.
I tried to warn folks that I know about FB before the IPO. Unfortunately, some people still lost money. Maybe some will do okay in the long run (years)... Cheers.
“Luck is what happens when preparation meets opportunity.” - Seneca
Disclaimer: Please only use this information with a grain of salt and at your own risk / for educational purposes. I am not an investment advisor so please seek professional help if that's what you're looking for.
