Sunny
Facebook Inc (NASDAQ:FB)– the stock has a much higher price to earnings ratio compared to the average stock. Does this make it a sell? Some people are worried about where the magical revenue stream will come from. I look at the horizon, and see the US government and states in need of cash, citizens still spending their money overseas on gambling and realize that, eventually, the US will legalize internet gambling in some form.
Now, Facebook surprised me by putting Bingo and slots on its British version of the site. (I didn’t believe it fit into Zuck’s ethos) It’s a no brainer that they would do the same in the US. They have a Billion users, poker is a social game, bam, Huge potential revenue stream. I say the outlook is blindingly sunny in addition all their other tinkering with generating revenue from the site.
Sandstorm
Research In Motion Ltd (NASDAQ:BBRY) Blackberry
– I have met too many people who waited for the iPhone 5 to come out, and intentionally waited for it to dump their Blackberry, which none of them described their old phone in nice terms. The “stickiness” of a platform’s OS with all the apps you have downloaded means that you have a switching cost of some kind, even if just a pain in the butt. I think Blackberry is too late to the party.
Additionally, the fact that voice dictation for emails and texts has gotten so good means the keyboard is almost for luddites (or people in crowded offices) Horizon: Sandy
Am I Right?
Time will tell; but I assure you, looking at revenues and analyzing margins won’t account for what I wrote above, and therefore I find someone who can give me insight on the horizon more valuable than crunching numbers.
I tried to convince a family member not to buy a house in 2006. “They are giving 500k, no money loans down to truckers making 35k a year. How is that sustainable?” Yet if you analyzed bank earnings, they were off the charts, with their mark to fiction accounting, etc.
One simple, accurate look at the horizon would tell you a major sandstorm was coming. People were blinded by the “diamonds” at their feet.
Where Number Crunchers Prevail
Amazon.com, Inc. (NASDAQ:AMZN) stock. Look at the lofty valuation and low margins it has. A moat, definitely, and I love using their service, and it has become a regular part of my life. But you cannot look only at the sunny horizon I believe the company has, because if the stock is not of good value you can’t buy.
I honestly don’t understand it, the accounting, how to value the company, and that’s why when places like the Motley Fool are willing to sell info on it, so that I can understand why it might not be as pricey as I thought, I might be willing to buy.
In the Meantime
I really think as an individual investor, your time is better spent looking at the horizon. The accounting sands are really hard to read. If you’re going up against the MBA number crunchers (sand readers) at JP Morgan you’re at a disadvantage. Look ahead rather than down. You’re much less likely to be buried in the sands if you can see the storm approaching.
The article Getting Buried In The Coming Sandstorm- Not So Good originally appeared on Fool.com and is written by Margie Nemcick-Cruz.
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