It’s rare that I talk about individual stocks on here. I try and stay away from this because I’m a firm believer that it’s more important to have a good investing strategy than having a good stock pick (since no one really knows if it will actually be successful or not). That being said, I have two reasons I don`t think Facebook should be part of your portfolio.
1) They might not be around in 5-10 years.
2) If they are around, they will be too big to function successfully.
Some of you might think I’m crazy to say that Facebook won’t be around in 5-10 years. What I mean is they won’t have the gigantic presence they have now. Facebook is a household name, but I can remember when Myspace was a household name. I never dreamed they would disappear, but they did. I’m currently taking a social media marketing class (inbound marketing, personal branding), and we get to talk to experts in social media from all over the USA. Most of them agree that the social media industry is changing fast. They either said Facebook won’t be around in the not so far future, or they won’t be as influential as they are now. Either way, it makes Facebook a bad long term investment.
Jump forward 10 years, do you see Facebook? If you do, here’s what you’ll see. They will most likely be a carnivorous machine that buys up new start-up companies to expand their market/services. Ok, move back to present times. Their growth has already started to slow down. New competition is popping up every day. It’s inevitable that they will start acquiring other companies. As they grow into new markets/services, they will become less efficient. We always hear the saying too big to fail, but I think it’s too big to function. The buzz around the Facebook name will eventually disappear, and their inflated stock price will fall flat. I don’t think this scenario is far-fetched. It’s happened to many companies in the past (Bank of America is a good example). More and more people/companies are starting to see the power in social media, but as that power grows the major players will change.
I have little doubt that their stock will do well at first. Speculation will drive the price up. The richest 1% will make a killing. Heck, maybe even a few of us could make a quick buck if we get lucky, but we should be thinking about the long haul. There is a fine line between a quick buck and a big loss. Am I completely insane? How do you feel about the future of Facebook?