Friday, September 14, 2012

Facebook: A value investment?

Not quite. But the pessimism is over done. The valuation of sub $50B given the potential ad revenue (mobile and desktop) is too cynical for a platform with 500m active users. What turned the table for me is the hope and promise of the new Facebook Exchange. This tool sells real time data on user interest and then sells the add spots related to that subject. "Facebook is doing a better job than Google Inc. (GOOG) in getting Web surfers to click on advertising based on browsing history, according to some partners using Facebook Exchange. Facebook Exchange, or FBX, generates as much as four times the return on ad dollars than other real-time bidding systems, said Triggit Inc., which makes software tools to help Facebook deliver the ads. Another partner, AdRoll, said advertisers used to getting $10 for every $1 they spend are making $16 for every dollar spent on FBX." If Facebook is able to garner even part of the promise of this enhancement of the platform, the valuation will skyrocket from here. Unfortunately, based on the authors personal 'user experience' with Facebook, this investment is still a opportunitistic trade on the markets enthusiasm for high potential concepts rather than an intended long term holding. The author has already initiated a position in Facebook at $21.90.

Wednesday, September 12, 2012

Picky about homebuliders: Buy Ryland

Ryland avoided the worst of the housing crisis due to geographic diversity in it's land portfolio, and selective development. Since then Ryland Homes has waited for turnaround in the market.
Now Ryland has communities being built in desirable areas and thus should expect high demand during a turnaround.
Ryland has 36.7% debt to value ratio, and $300m cash on the balance sheet. There has been a 40% increase in orders in the 2nd Quarter of 2012 with a positive outlook for the future. The company expects to be solidly profitable through the end of this year and into 2013. The author is long RYL at $29.24.

More on Vietnam

A recent arrest of one of the top bankers in Vietnam is identified as the catalyst of recent swoon in the price of VNM. "Then came news of the arrest of two noteworthy Vietnamese banking scions, headlines that dealt a blow to investor confidence in the country's banking system. What is ironic is that Vietnam is a former French colony and it is the French that have a term for these kind of unforeseen events. 'Force majeure,' or act of God, is arguably not an exaggeration when comes to the impact recent events in Vietnam have had on VNM. The arrest of tycoon Nguyen Duc Kien, one of the founders of the Asia Commercial Bank, has struck fear in the hearts of investors that previously had not been shy about embracing VNM or Vietnamese equities." Read more: Yet the banking sector remains strong. "What is lost amid all the negativity now surrounding Vietnamese financials is that the country's banks had $575 million in excess cash as of mid-April." Thus the banks are very well capitalized and there has been no major economic policy changes. The author is still very optimistic on Vietnam and looks at this as a great entry point for Vietnam.