[GregWeld]

Originally Posted by BC69

Greg - I respect everything you got going on with this thread, but the FB and Gambling thing is unfair! What is really is, is investing 106 at work.



Facebook is a GREAT company! But the valuation is why the stock is moving down. If you applied the same peer multiples of earnings, operating income, or revenue to Apple, Apple would be a trillion dollar company. So it didn't take much analysis at all to realize it was over valued. But it also doesn't have another company remotely like to compare too. Myspace at its prime in 2005 was bough by News Corp for $500MM, so if thats the one marker, its not a good sign. The smart money (and you did it too!) was in and out the same day. The really smart money was in pre-IPO and out at IPO (The venture capital, the underwriters, Goldman, Microsoft, management). The mom's and pop's are now just going to have to enjoy the ride.

Second: Growth stocks do not pay dividends and should not. When a company pays a dividend it is a signal to the market that the yield the investor will get from the dividend is higher than what the company thinks they can get by reinvesting it into the business. FB profit grows at 100% a year, so clearly they can use the money better than an investor can. Apple, while still growing had $100bn in cash and no smart acquisition targets so it decided to give that back. A sign that the company is maturing.

I know this is 102, but if we are being fair - picking a dividend stock is just as much of a gamble as picking a growth stock. (I know! I know! I am going to get flack for that!) When this gets to 103,104,105,106 and beyond if when you can learn some basics to help figure out the best move.

Also, I say all of this, and come off defensive because for young people just starting out it is very commonly advised to have growth stocks as the largest portion of your portfolio. You have time on your side and can afford the risk. Its for older investors that the shift to dividends and bonds becomes heavier. So I don't only the word of the dividend being preached haha!

Somewhere in all your research you missed the TOTAL RETURN portion of investing. Growth --- Growth and Dividend --- or just plain old gambling... it's always the TOTAL RETURN number over a longer period (5 to 10) that I seek. NOT just a dividend.