I’m really looking forward to seeing Facebook’s (FB) earnings on Thursday. Everyone will be watching the company’s revenue growth to see if it continues to decelerate. Facebook is a tremendous business but to warrant its massive market cap the company must meet exceptionally high standards. While they certainly may be capable of doing so, as a value investor I like buying businesses where it is difficult to “blow up” the investment thesis. Unfortunately this discipline keeps me out of some investments that work out quite well such as the Google (IPO) but by maintaining strict standards, it prevents blow ups on overvalued growth stocks like Netflix (NFLX) or Green Mountain (GMCR) were. Usually once a growth stock turns into a value stock the business value ultimately catches up with the market capitalization. It can take time and there are hiccups that can be quite painful but we usually wait for this to happen before we enter into an investment. In a situation like Google currently we can buy stocks with well above average growth prospects at a no-growth price.
INVESTING IN THE FINANCIAL MARKETS INVOLVES RISKS. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS.