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News Analysis date published New:
Friday, September 14, 2012 - 15:00
New Date created:
Monday, September 17, 2012 - 11:54
New Date last updated:
Friday, September 14, 2012 - 15:00
Forget Facebook: These Stocks Have Much Better Value and Profit Potential
Friday, September 14, 2012 - 3:00pm
I'd like to declare a moratorium on Facebook (Nasdaq: FB) IPO carping. The stock has gone from $38 to roughly $19. Everyone's upset: Facebook employees, the financial-media talking heads, individual investors, even people who have never logged on to Facebook.
Mark Zuckerberg and all of the other Facebook millionaires got their big payout. The financial media got to hype the offering nonstop, and now they get to complain about how poorly the IPO was handled and how much the stock has gone down. Wall Street got huge fees and commissions, while retail investors got what they wanted: Access to IPO shares.
Facebook didn't skyrocket from $38 to $760 by lunch time that day. But Facebook is still an incredible media force that will eventually figure out what it wants to be when it grows up. The company will make money. The stock price will appreciate. The website will amaze and astonish users.
Until that happens, there are much better ways to make money on the social media and Internet hype. All you have to do is look deeper...
You can start with the companies that make it possible for you to connect to the Internet and see your sister-in-law's recent pictures on her Facebook page, for instance. The first company that comes to mind is AT&T (NYSE: T), which is a great stock. But it looks a little rich right now, trading at almost 51 times earnings and yielding just under 5%.
A savvier alternative: Vodafone Group PLC (NYSE: VOD), the world's second-largest moble telecommunications company, trades at 11 times forward earnings and yields a little more than 5%. Incidentally, 41 cents of every dollar you invest in Vodafone gives you exposure to Vodafone's 41% stake in Verizon (NYSE: VZ) and an awesome international presence in more than 30 countries.
The devices with which we access Facebook also need fast brains. Intel Corp. (Nasdaq: INTC) makes them by the truckload. Thanks to some less-than-stellar pre-announcement of quarterly results, the shares now trade at an attractive 10 times forward earnings. The dividend yield (which the company has been raising lately) is also flirting around 4%.
Established digital brands are making money and offer real value right now as well. Online pioneer AOL (NYSE: AOL) isn't the company that mails out a bazillion CDs anymore. It owns a real portfolio of solid properties. Its recent acquisition of news and opinion aggregator Huffington Post proves that. Shares trade at a ridiculous three times trailing and forward earnings and at tangible book value. Although the stock pays no dividends, the bargain basement value makes it worth a second look.
If you're looking for dividends from a digital brand, then United Online (Nasdaq: UNTD) yields around 7%, trades at 8.5 times forward earnings and is priced right at book value.
Action to Take -- > Instant riches with a hot IPO are extremely hard to come by. You should do your homework and hunt for actual value like what you can find in the stocks I mentioned above. In the long run, the extra work pays off.
Adam Fischbaum does not personally hold positions in any securities mentioned in this article.StreetAuthority LLC does not hold positions in any securities mentioned in this article.