Daily Investment Tips

I have read many comments complaining why at $100 Billion value Facebook is over valued. The logic is, with profits of $1billion a multiple of 100 is wrong.

Take a look at tech IPOS of other tech giants, Google and Apple, that Facebook is compared to and you will say those companies where even more expensive during there IPOs.

Apple IPO PE ratio.

Apple Inc – today, the world’s most valuable technology corporation – went public at a valuation of just $1.19 billion in 1980, equivalent to 25 times revenue and 102 times earnings.

Google IPO PE ratio.

Google – to which Facebook is most often measured against in terms of potential – was valued at $23 billion at the time of its 2004 debut, or 218 times earnings.

This is my my thought about Facebook “It’s the next Google.”

written by Constantine Njeru \\ tags: Apple, apple ipo, Facebook, Facebook IPO, Google, google ipo, Ipo

If you read the news in 2011, most headlines was about how bad things were for investors, falling stock markets and European debt crisis. But the true is even in this crisis there were areas where investors made money. Investors who bought Junk bonds of companies such as Ford saw good returns, some stocks even out performed the market in 2011 (check this video of best performing stocks in 2011). The lesson here is, if you look at individual stocks you are likely to find value and opportunities.

Best Opportunities to Invest your Money In 2012

Facebook IPO in 2012

You can’t talk of investment opportunities in 2012 without mentioning Facebook. 2012 is the year this social network will go public. I have big feeling Facebook is another Google: it will keep getting bigger and bigger. Other tech IPOs in 2011, Linkend and Groupon, opened high on first day but came to down later. The only people who made money were the early investors and the few who were lucky to buy the IPO.

Buying Short Term Bonds

As rates go up, the value of bonds that have long dated maturities go down, sometimes significantly. For that reason, stick with short term bonds (both government and corporate), Inflation Linked Bonds (TIPs) and Floating Rate Notes. Once rates go up — and they have nowhere to go but up — gradually change those holdings into longer term bonds.

Buying Under Water Properties

There are millions of mortgages across US that are under water, the value of this properties have fallen low and the return on investment is now high. If you have enough cash and you buy this properties, you can get a good return renting out the properties.

Investing In Companies Catering in Luxury Goods

2011 was the year the middle class disappeared. Companies that target the upper end of the market have continued to do well. Stats indicate the number of super rich people has gone up, these group continues to spend on luxury cars, boats etc. Companies like Lululemon Athletica (targeting Yoga lovers) have continued to see year-over-year earnings growth at or above 50%.

Investing in Low End companies

As the middle class disappears, the majority of these people are finding themselves in the lower end. As numbers of low income people continue to swell, discount retailers such as Wal Mart will continue to do well.

To find best opportunities to invest your Money In 2012 you need to look at individual stocks and not the whole market.

written by Constantine Njeru \\ tags: Athletica, Best Investments, Best Performing Stocks, Cars Boats, Debt Crisis, Facebook, Google, Inflation Linked Bonds, investing 2012, investment 2012, Investment Opportunities, Ipo, Junk Bonds, Linkend, Luxury Cars, Luxury Goods, Maturities, Middle Class, opportunities 2012, Return On Investment, Stock Markets, Term Bonds

The biggest myth spread by Facebook haters is Facebook doesn’t turn a dim. This people have a hate for everything Facebook and it is only natural they look for anything negative and in the process miss the positive.

Facebook Profits Facts

According to Reuters, Facebook’s revenue doubled to $1.6billion in 2011′s first half, a source with knowledge of its financials told Reuters. Facebook profits during that same period was $500 million.

Estimating where Facebook Profits & Revenues now stand

Estimating financial results for a fast-growing company like Facebook is always difficult, since so much is unknown, but if figures provided by the WSJ and the NYT are correct, the network’s revenue climbed about 160 percent in 2010, and its profit doubled. Continuing that kind of growth would result in revenue of more than $5 billion this year, and assuming the profit margins stay at 20 percent, profit may be close to $1 billion.

written by Constantine Njeru \\ tags: Estimates, Facebook, facebook profits, Myth, Nyt, Profit Margins, Profits, Reuters, Wsj

I just heard interpublic, a facebook early investor, has sold a small part of it’s facebook stake for $100 million and I wondered who are Facebook shareholders? According to a Business Insider article the following investors are facebook shareholders.

1. Facebook staff : 30%
2. Mark Zuckerberg: 24%, $5.3 billion
3. Accel Partners: 10%, $2.2 billion
4. Digital Sky Technologies: 10%, $2.2 billion
5. Dustin Moskovitz: 6%, $1.3 billion
6. Eduardo Saverin: 5%, $1.1 billion
7. Sean Parker: 4%, $880 million
8. Peter Thiel: 3%, $660 million
9. Greylock Partners: ~1.5%, $330 million
10. Meritech Capital Ventures: ~1.5%, $330 million
11. Microsoft: 1.3%, $286 million
12. Li Ka-Shing: 0.75%, $165 million
13. Interpublic Group: <0.5%, $110 million

Other Small Facebook shareholders

Adam D’Angelo, Matt Cohler, Jeff Rothschild, Chris Hughes and Owen Van Natta, Mark Pincus, Reid Hoffman, Western Technology Investments, the Winklevoss twins.

These are the major facebook shareholders. There are other facebook shareholders who own a share of facebook through investment funds such as Goldman Sach’s.

Since business insider published this facebook shareholder list, Goldman Sach’s has bought into facebook and the above shareholdings have changed to reflect Goldman Sach’s facebook investment.

written by Constantine Njeru \\ tags: Accel Partners, Business Insider, Capital Ventures, Chris Hughes, D Angelo, Digital Sky, Eduardo Saverin, Facebook, Goldman Sach, Greylock Partners, Interpublic Group, Li Ka Shing, Mark Pincus, Mark Zuckerberg, Matt Cohler, Moskovitz, Owen Van Natta, Peter Thiel, Technology Investments, Western Technology

Facebook revenues in 2010 was near $2billion. Many facebook analysts are trying are trying to crunch the numbers and make a forecast for facebook revenues.  An interesting facebook revenue forecast comes from the writer, Adam Rifkin. In a techcrunch article, he shows the ways that Facebook’s annual revenues could grow from $2 billion to more than $30 billion in five years a diverse set of revenue streams.

The author shows different ways that Facebook will make money.

Facebook Ads

Facebook Credits

Facebook Search

Facebook Games

Facebook pages & Places

The article is not about the revenue streams Facebook has; it’s about the revenue streams they’re about to have.

Read the whole article at techcrunch

written by Constantine Njeru \\ tags: Adam Rifkin, Ads, Amp, Different Ways, Facebook, Money Search, Revenue Projection, Revenue Streams, Search Games, Search Pages, Writer Adam

Mark Zuckerberg, the founder of Facebook has made his first property investment. Zuckerberg, who is valued to be worth $13.5 billion by Forbes, purchased a $ 7 million home. The house is located, Edgewood Drive in the Crescent Park neighborhood in Palo Alto, California.

Before this investment, Zuckeberg was a fun of renting. But it seems he has given in to that American dream of owning a house. Good for him!

According to Yahoo Real Estate News, the restored historic Palo Alto, Calif. abode encompasses 5,617 square feet on a 17,100 square-foot plot. It includes five bedrooms, five and a half baths, a banquet-size dining room, a music alcove and glassed-in porch. The backyard has a saltwater pool, a spa, an outdoor gazebo with a wood-burning fireplace and a carport.

written by Constantine Njeru \\ tags: Abode, Alcove, American Dream, Bedrooms, Carport, Crescent Park, Dining Room, Facebook, Forbes, Investment Property, Mark Zuckerberg, Outdoor Gazebo, Palo Alto California, Park Neighborhood, Porch, Property Investment, Real Estate News, Saltwater Pool, Square Feet, Wood Burning Fireplace

Renren, the Chinese Facebook,  made a big start on it’s IPO debut. Renren IPO price was $15, the shares rose near 40% on the first day to settle at $19.

Despite critics arguing the company was overvalued, investors seemed to be very thirsty for new tech stocks. Renren, China’s answer to Facebook, raised $743m.

Renren valuation was 67X revenue, versus 25X revenue for Facebook’s private markets valuation.

Investors seems to have thrown caution to the wind. Currently ‘Chinese Facebook’ Renren has about 5 million users a month and the company continues to make a loss. The only way to justify this IPO is to say investors are betting on the company’s potential to rope 1 billion Chinese.

written by Constantine Njeru \\ tags: 1 Billion, 5 Million, Bonanza, Caution To The Wind, China, Debut, Facebook, Investors, Ipo Price, Private Markets, Rope 1, Tech Stocks

At $500 – 600 Google stock might seem expensive but if you look at Google fundamentals you may understand why 35 out of 38 Google analysts polled by Thomson Financial rate Google shares a Buy.

Google Stock Forecast : Google Stock prediction : Google stock outlook

One fundamental that makes a good case for Google stock to rise higher is data on internet advertising.

The nation’s top 100 advertisers direct just 5.5% of their total ad spending to the web, according to industry trade publication Advertising Age. Meanwhile, Internet advertising is expected to hit 9% of total ad spending by 2011, according to Jupiter Research, an industry research firm.

Paid search advertising, which is Google’s bread and butter, accounts for 40% of total ad spending on the Net and is the fastest growing category, helped by the fact that it’s both cost effective and highly scalable.

“Even at 40%, search has just barely scratched the surface,” Aggarwal says. “We think advertisers on a long-term basis are going to embrace search. Google, with the largest market share, is the biggest beneficiary of that growth.” Data Source: smartmoney.com article.

Although Google has been accused of being a one trick-pony that relies 99% on advertising, the above data shows Google core business of  search advertising is solid and the company will continue on the path of higher revenues, higher profits that translates to a higher stock price.

Facebook : The elephant in the room

Facebook is growing fast and attracting advertisers but i don’t think Facebook is a threat to Google business. Google is good at search advertising while Facebook is good at display advertising.

written by Constantine Njeru \\ tags: Advertisers, Advertising Age, Aggarwal, Amp, Bargain, Beneficiary, Bread And Butter, Core Business, Data Core, Data Source, Display Advertising, Facebook, Google, Google Google, Googles, Internet Advertising, Investing Stocks, Jupiter Research, Market Share, Nbsp, Profits, Search Advertising, Search Google, Shares, Show Business, Smartmoney, Stock Forecast, Stock Outlook, Stock Prediction, Stock Price, Term Basis, Thomson, Thomson Financial, Trade Publication, Trick Pony

Investment valuation in new age internet companies is soaring. Facebook is valued at $50 billion, Twitter is valued at $10 billion and Groupon is chasing a $25 Billion IPO. For some jittery investors it feels like 1999, and they are saying this  is a new tech bubble.

Is it really a Tech Bubble?

It feels like one. All bubbles, stock market, real estate, commodities e.t.c happen during a period of high liquidity. The more money flows into an asset class the higher the price of that asset rises.

In the tech bubble of 90s, the bubble got in gear when investment funds started raising money to invest in then technology companies. Just like then, we see Goldman Sachs e.t.c raising billions to invest in the new age technology companies. Source NYtime article.

Tech Bubble Prediction

When it comes to prediction, history is a good guide. In any bubble there are a few winners and many losers. In the tech bubble of 90s we saw Amazon, Yahoo & Ebay emerge while a string on losers Webavan, Akamai, Jupiter networks and many other were trashed in the dustbin of history.

Today, the bet is on internet companies with a competitive advantage (business model that cannot easily be copied) like Facebook & Twitter to emerge victorious. On the other hand companies like Groupon & others whose model can be easily copied might not make it.

The challenge for investors is picking winners. The situation is best summarized in NYTimes article:-

As cash continues to pile up, the fear is that all this money cannot be put to work responsibly. With only a few perceived “winners,” some investors must be choosing losers or paying too much.

 

written by Constantine Njeru \\ tags: Amazon, Asset Class, Competitive Advantage Business, Dustbin, Ebay, Facebook, Goldman Sachs, History Today, Internet Companies, Investment Funds, Investment Valuation, Jittery Investors, Liquidity, Losers, Money Flows, New Age Technology, Prediction History, Raising Money, Technology Companies, Twitter

Bloomberg news is reporting Zynga is in talks to raise funding from T. Rowe Price Group Inc. and Fidelity Investments at a valuation of close to $10 billion.

Valuation of these new generation tech companies seems to be rising every passing month. Facebook has hit $50 billion, little Twitter has just hit $6 billion and now Zynga valuation is estimated now at $10 billion.

Zynga Secondary Market Valuation

As off  February 2011, Zynga was valued at $6.2 billion on secondary exchange SharesPost Inc.

The stunning thing about this rush to buy shares in private market is, investoras are punting their money without having a look at the tech companies financial statements.

Investors are betting on making a killing in the IPO market. They were right when they said, IPOs are for gamblers!

Zynga 2011 revenues

Zynga is a private company and the only revenue numbers out are rumours  from people close to the company. The latest estimate is Zynga revenue topped $600 million in 2010. With the successful launch of latest game, cityville in 2010, these revenue can only rise in 2011.  Zynga is thought to be profitable.

written by Constantine Njeru \\ tags: Bloomberg News, Cityville, Facebook, Fidelity Investments, Financial Statements, Gamblers, Investors, Ipo Market, Ipos, Launch, Market Valuation, New Generation, Private Company, Private Market, Revenue Numbers, Rush, T Rowe Price, T Rowe Price Group, T Rowe Price Group Inc, Twitter