Big Can Get Bigger: updated thoughts on Facebook
by Travis Johnson, Stock Gumshoe | July 28, 2016 2:06 pm
Checking in on my largest personal holding
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Source URL: https://www.stockgumshoe.com/2016/07/big-can-get-bigger-updated-thoughts-on-facebook/
Sold $21 puts against it in Aug 2012 thinking that’d be safe, and got put the stock anyway. Then sold covered calls against it ever since, and it always seems to close just below my strike. Can’t seem to get rid of it. If you’re right, Travis, maybe I should stop trying so hard.
Thanks for your thoughts Travis.
I was thinking that some CRTO call options may be a thought as they have earnings next week. I know they provide marketing for some of these monster tech companies and since Google and Facebook are lighting it up on mobile ad sales maybe CRTO grabs their share of the positive news.
Any thoughts? JB
They should show strong growth, though there’s been a bit of a hit recently from a back-and-forth lawsuit (and the weakness of European currencies). I’m long CRTO through options right now, and there’s some logic to guessing their quarter will be stronger than expected… But you never really know with a quarter that’s a snapshot in time.
I love FB, always have. I have ALL of my 401k invested in it.
Holy cow, you must be WAY more comfortable with risk than I am! I can’t imagine having even 10 percent of my retirement savings in one stock. Hope it works out for you!
Well, I knew that would raise a brow. Let’s just say I started with a new company and my 401K is only 2 years old, so it’s only a small portion of my overall portfolio. I do have a substantial IRA that is diversified, although the funny thing is after FB IPOd and dropped, I did purchase it at $17 with money I had in my HSA only bc I couldn’t access my IRA funds. If only……
Glad to hear it!
Hello, Travis and to all Irregulars (of which I am one),
This is my first comments and may be my only one as I would rather read the thoughts of others, who are more informed than I am. But I thought to write today because of Travis’s references to Facebook’s lack of presence in China, which touches on the absence of many tech companies that have a mobile component or social media component and that are have non-China origin/ownership (e.g., Google. Twitter) in China, and therefore banned by the government of China from consumer access and use in the country.
But first, two short notes on where I am and what I do not do. I work in China now, and have travelled in the country extensively in China before working. I do not use Facebook or Twitter. However, I use WeChat (owned by Tencent) because my colleagues and friends in China use WeChat.
A lot of financial press and analysis has pointed out that the absence or near absence of foreign-owned tech companies (e.g., Facebook, Google) in China is a large impediment to their market expansion and market share growth. And if only these companies could reach mainland Chinese consumers (not counting Macau and Hong Kong, although the number consumers there is negligible when compared to about one billion consumers or potential consumers in mainland China), they could really achieve growth.
I can only add, anecdotally, that the absence of foreign tech/social media/mobile companies in China is not that significant to their growth. Yes, access to China would add to the top and bottom lines but in the end you have to remember that one billion consumers in China is comparatively small compared to the rest of global consumers, about five or six billion.
The absence of foreign-owned tech/social media/mobile companies in China is an advantage for home-grown (or home-sponsored/funded) companies. Certainly, companies like Baidu (Google-like) and Tencent (sort of Facebook-like) have gained from the absence of foreign competitors. But these native companies are so fixed on accessing the huge domestic market that they neglect to develop their international markets, or the lack of competition (is the correct word ogligarchy?) hobbles them from asking themselves how to properly access non-China markets. (For example, has anyone other than those in China use Alibaba or Jindong, in places outside China?)
I travel often in Asia and observe that people other than Chinese residents or Chinese tourists or foreign residents in, for example, Japan or Thailand, do not use Baidu or WeChat. They use Google, they have Facebook accounts. When foreign residents in China (who can only use WeChat or Baidu) are in other countries, they use WeChat to contact people who only have WeChat (meaning people in mainland China), and use Facebook and Google or the services of other non-Chinese companies for non-China individuals. Also, foreign residents and some citizens China use VPNs in China when they want to use Facebook or Google.
I should also add that when Chinese citizens go abroad, to study or do academic programs, they use native company services to communicate with friends and relatives back home (in China). However, they use Google mail or open Facebook accounts because so much of the rest of the world outside mainland China, for work and social purposes) do not use WeChat or Baidu, and do not know of these companies (because these companies don’t have substantial international presence or don’t know how to expand their international presence).
I should add, and here I know that I may overly generalize, that the user experience of WeChat and Baidu and other China origin companies has different user experience and seem to cater to the user experience of China consumers. (Ads pop up all over the place, there are intrusive news feeds.)
So, yes, mobile/social media/ tech companies could have more and better top and bottom line performances if they could be in China (and they may one day), but the China presence puzzle is, in my opinion, overblown.
Regards,
Slumbek
$FB, $GOOG, $GOOGL, $TCEHY, $BIDU – Chengunlam, thank you for sharing your global insights and experience.
Please continue to post, as I find your comments enlightening and beneficial. #Best2You ~ Ben @H0U3
Thanks Slumbek, great perspective — I appreciate you sharing it.
Yes, I really had Apple on my mind when I was writing that — for big companies that seem to be reaching saturation, the search is always on for that next big bolus of possible growth. For the iPhone, it was the quick growth in Chinese sales after their first wave of carrier deals that brought Apple that (somewhat surprising) next wave of growth starting a couple years ago. For Google and Facebook, China remains the only real market that could create a few hundred million users with one flip of a switch, so that’s always going to be tantalizing for investors… I don’t expect those two will ever be big in China, since both seem to be (rightly, I think) still resisting acceding to Chinese censorship demands, but it’s a good point that “access to China” shouldn’t be overstated.
Dear All,
Slumbek here (which I prefer to chengunlam but both okay). Thanks for responses. As an example of how underprepared China-origin/owned/fund tech/mobile/social media companies are for international expansion, go to http://www.baidu.com. Baidu is the equivalent of Google in China and probably I guess is +90%domestic market share of search engine firms. Type in a search item in English and look at search results. At the top of the search items, you have a choice of entries in English or in Chinese. You can be anywhere in the world, and the only language choices for search entries is English or Chinese. Now, I’m sure Google does not have language choices for all languages (e.g., Kazakh, although it may be working on it), but the fact that Baidu has only English and Chinese as default language choices for search results reflects the lack of localization to different countries and their users/consumers. (Here, I should say that the US and China share many aspects of a self-view of exceptionalism in social, cultural, economic and political spheres; and that despite the government of China’s continual criticism of the US that it – China – seeks to emulate it); and reflects sort of a inward chauvinism that the user/consumer has to understand Chinese or English (granted that English is a default for a kind of world-wide lingua franca). Furthermore, unless you are in a place that does not censor news and coverage, or have a VPN to access a place that does not censor news or content, many search results cannot be accessed, informed by a window that says ‘Cannot show’. For example, in Baidu, type in ‘Tibet’, select English as default language and click on a search entry. You will get a ‘Cannot show’ window, or the clicked result is a view on Tibet/Tibetan that aligns with a view that is allowed in China. Search results are China-orientated and (acceptable) Chinese-orientated. This bias indicates that China-origin/owned/funded firms are severely restricted in what they can show users/consumers in China and elsewhere. Why would consumers/users in places outside mainland China be only interested in biased-coverage? The link between this bias and the limitations that they place on the ability of China-origin/owned/funded firms to expand their markets internationally is subtle but, in my opinion, strong, although I cannot point it out clearly (better thinker than me is needed).
Just another note: to be an international business player and develop a brand, a company needs an easily pronuncable name. Huawei? I have non-Chinese acquaintances who have a Huawei phone but cannot pronounce it. (Say, in English ‘who’ and ‘ah’ quickly and then add ‘way’). But even Huawei is much much better than something like ‘Hubei Province State-owned Heavy-Duty Diesel Engine Vehicles’ (in Chinese is also heavy tongued).
Regards,
Slumbek