All of us are probably struggling with the same mindset right now: A desire to stay “in the game” if the big technology stocks are going to continue driving the market higher, but a fear that the thrill ride might end abruptly that makes us wary of complacency.
The fact that stocks like Facebook, Amazon, Alphabet and Apple are dominant platforms for the digital economy doesn’t mean that they’re guaranteed to be “safe” at these prices. They may be, but I’m taking a risk in having more than 30% of my portfolio exposed to these kinds of investments. So I’ll go through them all this week — but since several of these stocks are reporting earnings today or tomorrow, I do want to first provide my thoughts going into the earnings report, and then I’ll follow up on Friday once we’ve digested the actual data (and, of course, get into the Annual Review updates for lots of other positions, most of which are not reporting this week).
So for now, the stocks that are almost immediately on the hook for earnings.
Facebook (FB) 11%+ position, $80 cost basis, earnings released after the close this evening (1/31)
Facebook is a core position, and a reasonably valued stock IF the analyst expectations about growth are anywhere near the mark, I consider it a hold at ~$190 and think the odds of continuing strength are pretty good, but with optimism still so high and the stock surging into earnings I’ve taken risk-reducing profits on a small portion of my portfolio, a little less than 15%, much as I did with Apple last Summer.
Facebook remains my second-largest position. The market is very concerned about whether Zuckerberg’s announced plans to change the algorithms for the News Feed will impact revenue, mostly because of worries that Facebook’s public commentary about dealing with the negatively addictive and dangerous feedback loops that are the outcome of Facebooks’ targeting. Zuckerberg indicated that he expects the changes to hurt engagement in the near term, but to be good for the business in the long term. “Engagement” means eyeballs looking at the News Feed, so if that reduces then the potential ad revenue falls.
Here’s an excerpt of what I noted when the news came out a few weeks ago:
“I’m willing to sit through this move so far, and to watch and see what Facebook actually does (the ...