52 Reasons To Not Buy Facebook On IPO Day
The Facebook IPO has attained a celebrity status and warrants caution for all those would be buyers in the open market on IPO day. I hesitate to mention the roaring ’90s internet boom and bust, but when news comes out of people betting their kid’s college savings on Facebook, it’s a reminder of that irrational exuberance all over again.
The IPO alone will give Facebook a valuation of $106 billion at the current IPO price. The only reason I’d try to get in on the IPO is to flip the shares. I’ll gladly take the quick profit, knowing there is too many people willing to pay too much for a company that doesn’t deserve the valuation.
The biggest concern with Facebook going forward is how will it turn all those friends and likes into big dollar signs. So far it hasn’t found a way to do it. If you think Zuckerberg, and the Facebook crew will succeed in doing so, go ahead and buy. I’ll even wish you luck. But I’m skeptical and have a few reasons to be concerned about buying on IPO day:
1. There is too much of a novelty factor surrounding the IPO, just so people can say they own Facebook. Read more…
The Complete Shareholder Proxy Vote Guide
Companies are bringing more social, environmental, economic and corporate issues to a shareholder proxy vote. Some of the proposals are no more than a litmus test to public sentiment, but it’s a start to broader corporate reform and a good thing for shareholders.
Of course, for this trend to continue, shareholders need to take part, which seems to be the biggest obstacle. Whether you have 100 shares or 100,000, it doesn’t matter. It’s your money invested in these companies and a wasted opportunity by not voting.
As a shareholder, understanding your rights, the proxy voting process and knowing the SEC proxy rules is the best way to stay involved. How you vote could have a direct impact on the company and your money going forward.
What is a Proxy Vote?
Every year there is an annual meeting and in between, any number of special meetings can pop up that need a shareholder’s vote. These votes can be done in person. But jumping on a plane every time a shareholder vote is needed can be excessive. Read more…
Remember Your Investment Horizon
When the markets start acting crazy, remembering your investment horizon will bring everything back into perspective. Fears in Europe, slowing economy, unemployment concerns, and a few hundred other data sets all contribute to the daily swings of the market. But you can lower your risk to these issues by building your portfolio around a strict investment time horizon.
So are we heading for a repeat of last year? Or are the recent market headlines just another gut check for every investor out there? More importantly, should it really matter? What is different today that will affect your investment risk? The answer should be nothing, if your portfolio is built around your investment horizon.
Focus On The Plan
When you invest, there’s a plan of attack. It should be based on your goals over the next few months, years and decades. Breaking those goals down, gives your investment time horizon. Which is the total length of time you hold an asset before it needs to be sold. Read more…
Value Investing Lessons From Warren Buffett
The biggest value investing name today is Warren Buffett. He didn’t get his Oracle of Omaha moniker from being average. So, when I have the opportunity to learn even a little bit from someone who’s been successfully investing for over 60 years, I take it.
The value investors journey to Mecca, the Berkshire Hathaway annual meeting, was this past weekend. Anytime the event rolls around, the value investing blogs usually unleash a few hidden gems.
One of those gems was an interview Warren Buffett did back in March for the MBA program at the University of Western Ontario, through the Ben Graham Centre for Value Investing. For an MBA student, it’s a rare opportunity to pick Buffett’s brain. Thankfully, they took notes to share with the rest of us. Read more…
Bond Basics: Bond Price And Yield Relationship
One of the more confusing aspects of bond investing is the relationship of bond price and yield. As bond investors we want high prices and high yields but it’s just not possible. At least not at the same time. This is where the confusion begins. In a time where interest rates are at all time lows, understanding the bond price and yield relationship is important.
Bonds play an important part of every portfolio. The basic asset allocation strategy says to have your age as the percent of bonds in your portfolio. I could argue for more or less based on risk and current yields, but that’s a post for another day. The bottom line is we should have some bond exposure in our portfolio. For now, lets just stick to the basics of the bond price and yield relationship.
Bond Yield
New bonds are issued at face value (par), with a time to maturity, and a yield (coupon rate) that involves several factors including risk. Bond yield is the return you will receive if you hold the bond till maturity. It’s in annual percentage form. So a bond with a 5% yield, will pay a 5% return each year until the bond matures. Read more…
Book Review: Millionaire Teacher
With Financial Literacy month coming to an end, its difficult not to mention the total lack of financial education we receive at the elementary and high school level. The reality is, it’s non-existent and nothing seems to be changing any time soon to correct it. So it comes down to us, as individuals, to pick up a book and teach ourselves.
The question is where do we start?
The Approach
I was recently approached to do a book review. It’s not a rare occurrence and I’ve had my fill of financial books over the years. So when the Millionaire Teacher finally showed up in the mail, I honestly wasn’t overly excited about reading it. Despite my misgivings, I gave it a shot and quickly found it was not your typical investment book.
The Millionaire Teacher is an investing autobiography of sorts by the author Andrew Hallam. He is a successful high school English teacher, investor and writer. Did I mention he’s a self-made millionaire on a teacher’s salary? Read more…
Shorting A Stock: Profiting On The Way Down
Shorting a stock is a high risk, high reward strategy. It goes against the market trend. It’s unnatural.
Everyone and their brother wants the market to go up, not the short seller. Shorting a stock is not the popular choice, but there are profits in going against the crowd.
Most of our investments go like this: we buy shares of a stock or ETF. Those shares will rise in value because our research says so. Then we’ll sell, make a cool profit and move to the next investment. That’s the simplified version. Shorting a stock or a short sale is the opposite.
What is a Short Sale?
The SEC defines shorting a stock as:
A short sale is the sale of a stock that an investor does not own or a sale which is consummated by the delivery of a stock borrowed by, or for the account of, the investor. Short sales are normally settled by the delivery of a security borrowed by or on behalf of the investor. The investor later closes out the position by returning the borrowed security to the stock lender, typically by purchasing securities on the open market. Read more…
