Investing in Facebook had been one of the most interesting event this year. From U.S election scandal, data privacy leaks to catastrophic earning forecast creating a roller coaster ride in share price. this ride is not means for "faint-hearted". So, hold your breathe and be thrilled......
Facebook is the lowest PEG ratio among FANG stocks in the beginning of the year. This company have great business moat in their own turf and competitors are non existence. The only social apps that gaining tractions is Instagram. Instagram is so popular among the millennial, however FB has nothing to fear, Instagram is part of FB's lunch menu.
Facebook as a company with great attributes:
1. Market leaders
2. Economic moat
3. high positive cash flow
4. no debt
Based on my conviction, I projected that Facebook will hit at least $200 by April when they announced Q1 results. I started to accumulate the stock between $178 and $184. After massing a huge positions, now I waiting for my lunch to arrive. But then, bad news comes.... the US election and data privacy scandal surfaced causing the share price dropped very fast. Within 1st week, it dropped 10% and following 2 weeks it hit the low point of $149. At this point, my losses already hit more than >USD10,000.
I was too slow to response to this new developments. Regardless, I noticed there was no fundamentally changed with the company's ability to generate great profit. I'm stayed with my conviction not to cut losses as I'm confident that it will recovers when the dust settles. True to my predictions, the stock start to recovers after Q1 earning announcement. I decided to par down my holdings between $178 and $195 to make a small profits.
This events had damaging effects on my psychology and ego as well. A great lesson learnt. Even if you have done your homework and you convince thing could never goes wrong, there are still many unpredictable events which beyond your control. The only thing you can control is your response to those unforeseen events. And for the records, Facebook continues with its bullish charge hitting $218 as I predicted early this year, and then stumbles back to $170s. As I looked back to this trades, I'm hoping to make a wiser moves in the futures. An epic lesson learnt in 2018.
- WILLIAM CHENG WL
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