Are you going to buy Facebook stocks? What do you think are the risks?
Facebook will go public, and it means stocks are for sale. Do you think it is a good buy?
Fundamentally, the prospects for the shares are fairly bright. The company has blazing (though slowing) EPS and sales growth and no debt.
No one knows for sure what will happen after the shares start trading. In his book, How To Make Money In Stocks, William J. O'Neil the founder and chairman of Investor's Business Daily details a plan for trading hot IPOs.
He recommends letting the shares trade for six to eight weeks and to observe any price patterns formed by the shares. O'Neil uses patterns like "cup-with-handle, flat base and ascending base," to follow the accumulation or distribution of a stock.
In short, I would want to see how Facebook shares trade for their first month or so. If the shares formed a bullish technical pattern and then broke out, I might buy them. However, I would put a stop-loss of 5-8% under my buy price to reduce risk. O'Neil encourages the use of stop-losses on all trades. This method worked very well with Google.
It's possible the FB IPO will flop. The market is where this will be decided.
Whether or not Facebook is a good long-term buy, I would wait until after the initial IPO hype has settled. IPO stock prices often rise out of the gates but, after a few tumultuous trading days, settle into a trading range. And usually the stock falls to its IPO price and lower sometime down the road. Leave the initial jockeying for shares to the professionals.
No. Active investing offers no benefit to ordinary investors.
Buying individual stocks are inherently a diversification risk for most investors. Generally you don't want one company to compromise more than 3% of your investment portfolio. Plus keep in mind that the IPO price and where the stock first trades can and likely are far apart on a hot issue. So unless you are getting accesss to the IPO, don't be shocked if the stock trades at elevated levels after the first public trade. That being said, that doesn't mean it can't become the next google.
No, to risky for me. This type of business is in an industry where changes happen too fast for the average investor to react without losing money. Whatever happened to MySpace? They were bigger than Facebook only a few years ago. I would rather stick with dividend stalwarts like MCD, PG, and KO that have stood the test of time and pay you for holding their stock.
an expert in social said he buy it up to 150B market cap...not sure where the price has to be for that though
This is a super hot stop. I would rather stay away from tech stock like Facebook. There are many more other options out there.
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