Monday, July 24, 2017

Nine Things I’ve learned about Investing in the Last Nine Years

Hey everyone!

It feels like an eternity since I've posted anything on the blog - about 1.5 years to be exact! My life has changed a lot (for the better) since my last post but I will leave that story for another day :). I am back in honor of a special occasion. 
If you follow me on Twitter you probably heard that last Monday 07/17 was my 9-year anniversary as a stock investor. I've been inspired to come back on the blog to reflect on some of the lessons I've learned so far.
If you are a seasoned investor the lessons I'll be sharing may seem simple or obvious to you. However, I can only speak for myself, my own experience, and the lessons I consider valuable for me personally.
Investing, as with personal finance, is very personal.

Before I get into it, here's a little back story ...

In the summer of 2008, just a few months shy of the financial crisis that shook the word, I purchased 4 shares of my favorite company at the time.
I clearly remember my investment grew by $50 over the course of one single week and I was blown away.
It wasn't so much the dollar amount. What I was impressed by was the idea that I could put some of my savings to work by becoming a part owner of amazing companies and I could see that money grow exponentially over time without doing anything.
Needless to say I was hooked. I couldn’t believe this was available to the average person. I started to wonder why I didn’t know more people who invested.
The idea and actual practice of investing is something that continues to impress me to this day and it is something I am extremely passionate about. I've learned A LOT during the past 9 years and I am looking forward to many more amazing lessons. 
And so, without further ‘ado, here are [some] of the things I've learned so far:
#1 Action > Daydreaming: Before I began my investing journey I hesitated for years on the best way to approach investing or how to actually get started. I read countless books and articles on the subject and still didn’t really “get it”. It wasn’t until I actually went through the process of buying my first stock via an online brokerage account that things started to click for me. With investing as with many things in life, action is paramount in order to get the ball rolling.
Is also important to start slow, steady and gain confidence over time as oppose to going crazy and crashing fast.
#2 Competition and Disruption Risk – these are two “simple” things that can tell you a lot about whether or not a company’s stock can turn out to be a profitable investment over time. When it comes to competition, for example, I've found that companies that operate in saturated industries, where there are no clear leader, and where consumers are often chasing cheaper prices over anything else, are usually not great investments.

In the case of disruption, it is also very important to keep top of mind the fact that technology moves fast. You don't want to be caught invested in a business that is being crushed by innovation and disruption. Is important to remain alert at all times!
#3 By the same token - some of the best investments come from disruptive companies that have very minimal (if any) real competitors and are leaders in their industry. Emphasis on disruptive.
#4 I've realized that the decision making process that comes with buying shares of stock in a company for the long term can be very similar to the decision making process that comes with lending someone money. I tried to explain this to someone recently and here's what I said:
"To put this into perspective, you can think of a public business (or stock) just like a person. Let's say someone you know asks you to borrow $2,000 and tells you they will give you that money back “with significant interest” in a years time. However, you know for a fact that they are in deep debt, have no job or a low paying job (low income or no income), can’t make ends meet (no profits), and have no clear plans on how they will get back to profitability- would you lend that person the $2,000? Probably not. Same goes with stocks!"
#5 Companies that have multiple streams of income often make great investments. Obviously, this is not a "hard and fast" rule that applies to every company. There are always exceptions. However, If you can find a company that not only makes money in different ways but that also has a strong respectable brand and is a leader within the industry in which it operates – you’ve probably found a pretty good investment.
#6 Immersing yourself in finance and investing content will make you a more knowledgeable investor that is able to make educated investing decisions. Even if at first you have no clue what anything means, eventually things will start to “click” and you’ll start to “get it”. I listen to podcasts, read books, articles, financial newspapers, etc. I never get tired of absorbing new investing content and learning more and more each day. I've found that absorbing this type of content has made me a better investor over the years.
#7 Understand when the market is giving you a great deal and learn when it is okay to put fear aside. This quote from my virtual mentor Mr. Buffet explains it best: 

#8 There is absolutely no need to buy IPOs right away – if a company is a good one you can wait a year or two before you buy any shares and still make a whole lot of money. If a company has true and sustainable staying power time will be the judge.
#9 Struggling companies with solid fundamentals eventually find their way. Again, it will always depend but I've found that when a truly solid company* is struggling, it eventually finds its way – either through an acquisition, a strategy that completely restructures the business, or any other 'innovative' way. You just have to have the patience to see things through.
This is why diversification is so important. Just as important as having the tolerance to ride the ups and downs of the market.
*by "solid company" I am speaking about a business that actually has sales, profits, cash in the bank, justifiable debt (if any) but may be going through issues -systematic or otherwise - that may be having an impact in the stock price.
Also, remember that sometimes it is also okay to move on as long as you understand that whatever happens in the future is something no one really knows for sure.
And there you have it! 
I am curious – if you currently invest, what is the best investing lesson(s) you’ve personally learned since you started participating in the stock market?  Share below!

Wednesday, February 24, 2016

Stocks I Bought in 2015, Why I Bought Them, And How They Are Doing

As an investor (not a trader) I usually hold the stocks I buy for at least 3-5 years or longer. For that reason, I am very careful with the companies I add to my portfolio and make sure that I carry out a good amount of research & due diligence before I become a "part owner" of a business (buy shares of stock).

Below is a rundown of my investing year in 2015 - what I bought, why I bought, and performance so far.

What I bought

In checking my transactions for 2015, I added the following companies to my portfolio:

Facebook (NASDAQ: FB)
Coca Cola (NYSE: KO)
Activision Blizzard (NASDAQ: ATVI) which is a stock I actually added to a family member's portfolio. 

For the majority of the above purchases, I wrote a blog posts for the reasons why I bought the stock (or re-started a position). As I have said before, it is very important for investors to understand the WHY of buying a particular stock. I believe in the power of writing down our original thesis so that, if anything changes with the stock in the future (i.e.:. the original thesis changes in any way). We can make educated decisions on what to do with the stock - either keep it in our portfolios for continued growth or sell and move on to something else.

Why I bought 

Below is a quick summary of why I bought each stock. I have included the link to the full "investing thesis" post  in case you'd like to read the 'elaborated version' of the reasons why I bought each one:


I used to be a shareholder of Apple for several years starting around 2009 but sold at some point in 2012, some time after Steve Jobs passed away because I wasn't sure where the company would be headed after its "mastermind" left us.  It also didn't help that the stock went on a downward spiral and I watched my shares go from $700+ down in to the $500 range, which is when I decided to 'pull the plug'. Had I held on to those shares, I would have come up on top regardless (as they say, hindsight is always 20/20). I re-started a position in Apple in 2015 and there is no hiding that the stock has been struggling. However, my thesis for buying shares remains intact as the company remains a leader and cash flow continues to grow, among other reasons. Although the performance of the stock itself has been less than stellar, I am holding on for the time being. 

When Facebook went public in 2012, I was SUPER skeptical of how exactly the business would make money for shareholders and definitely stayed away for some time. After a good amount of research (and checking out some of the awesome results the company started to report some time after it  became public); I decided to add some shares to my portfolio in 2015. What a ride its been! I want to say Facebook has been the best performer among my recent buys. Keeping an eye on developments to make sure it stays that way!

I heard about Activision Blizzard after checking out some stock recommendations by the Motley Fool (an awesome website I follow for investing ideas). Although I am not a gamer and have never played "call of duty" or "World of Warcraft" in my life, I am well aware that this is a billion dollar industry. And so, I put pen to paper and after completing my own due diligence, I got some shares for my sister's portfolio (she is in to games and so I try to add companies to her portfolio that are in par with her interests!). So far the investment has been doing great. Very happy with the results although, as always, I make sure to keep an eye on developments to make sure the company remains as successful as it has been. 

I have an "on again" "off again" relationship with Coca Cola stock. The price has remained stagnant trading at $37-$43 a share for several years! During a dip in 2015, the stock went down to its "average low" of around $37 per share at which time I decided to pick up some shares for the portfolio. Considering I watch the stock constantly, I am pretty familiar with the price movements within the stock. So far its been doing pretty good as well and its trading around its high of~$43 a share. 

Performance So Far

I have to say most of the stocks have performed well with the exception of apple, below is the percentage returns so far on those purchases (since added to the portfolio), from the highest to the lowest:

Facebook (FB): ↑33.47%

Activision Blizzard (ATVI): ↑23.14%

Coca Cola (KO): ↑8.93%

Apple (AAPL): ↓13.80%

And that's all folks! Hope you enjoyed this post. I apologize for the delay as I meant to write this one several months ago but better late than never! Let me know your thoughts in the comment section below. Would love to read about your recent purchases and how they've been doing so far. 

Have a great day and Cheers to profits!

**Remember to never invest or cease to invest based on any of the information provided in my blog posts! Always be sure to do your own due diligence. The market is unpredictable and there are no guarantees. posts are simply for educational purposes.

Saturday, December 26, 2015

It's been a while! Blog and Life Updates

Hello members of Teach Me To Invest,

First and foremost, my apologies as I have not posted anything on the blog for quite some time. I have been super busy (in a good way) with work projects that excite me, motivate me, and which I will be sharing more about very soon here on the blog.

I am still trying to figure out the direction I want to take with Teach Me To Invest. This blog is my "baby" and my first attempt at sharing everything I know (and continue to learn) about the world of investing with beginners and those who wish to get started. If you have followed this blog for some time, you know this is one of my huge passions and so, I'd like to continue contributing to the blog. If you have any recommendations and/or ideas of what you'd like to see here, feel free to send me an email: In the meantime, I'll keep brainstorming and look to come up with some cool ideas.

In terms of my stock portfolio, I have a blog post coming up regarding which stocks I purchased during 2015 and their returns. Stay tuned for that! I feel this year I made some awesome selections and have added some incredible companies to my stock portfolio so I cant wait to share that with all of you. Stay tuned. I'm also contributing to some financial publications so I look forward to sharing links to my analyst reports on here as well!

Wishing everyone an awesome holiday season! Looking forward to being more consistent with my posts on here so I need some accountability from you guys. Happy Holidays! 

Cheers to profits,

Saturday, July 18, 2015

Poscasts that are worth your time: Personal Finance, Investing, and Entrepreneurship

I’ve been a fan of personal development audio books for a very long time. However, I’d say it wasn’t until around ~2011 that I discovered podcasts and, with that, a whole new dimension of educational and motivating audio tools.

Fast forward 2015, this year, I have become a 'super fan' of podcasts. Although I’ve given many a try, I only listen to a very selected few, becoming a very loyal and committed listener. 

Whether the podcast is daily, weekly, or something in between -- all I can tell you is that I’ve listened to nearly all episodes of the ones I am about to share with you and always look forward to more. They provide me with so much value and I always come away with nugget(s) of wisdom. I rarely ever feel like I wasted my time.

Without further ‘ado, here are the top podcasts in my life right now (and which I would highly recommend):

Personal Finance

‘So Money’ Farnoosh Torabi

I've been a fan of Farnoosh ever since she had a show called “Bank of Mom and Dad” back in 2009. I then kind of followed her career and would watch her episodes on Yahoo! Finance where she hosted a series called “Financially Fit” (if I remember correctly).

She launched ‘So Money’ at the beginning of this year and I absolutely love the show. It comes on daily, Sunday-Monday (on weekends she answers questions from listeners). The guest she brings to the show are all entrepreneurs (about 80-90% of them) making an awesome living for themselves.

Although the questions to the guest are focused around the topic of personal finance, it also leaves room for them to talk about successes, failures, advise, and everything in between. The show is super inspirational {her very first guest was Tony Robbins!) I don’t know how else to explain it. I don’t miss an episode. Check it out. 


Motley Fool -- Market Foolery, Motley Fool Money, Industry Focus, Rule Breaker Investing

Is no surprise that I am a huge fan of the Motley Fool and have been for nearly a decade. I first came across The Fool via their articles on Yahoo! Finance and as soon as I discovered they had a podcast (circa 2011/2012 or so) I was hooked. 

My #1 go-to podcast has always been Market Foolery for quite some time now. What I like about the show is that they ‘digest’ daily events (Mon-Thurs) that happen in the world of individual stocks in simple and straight forward ways that anyone can understand. Anyone passionate about investing (or looking to learn) would love this show. 

Motley Fool Money is a similar version of Market Foolery but is a longer podcast (~50 mins or so) in addition to talking about current events from the whole week, they usually also have a ‘bonus’ interview with a guest. 

Industry Focus is a daily podcast and everyday they talk about a different industry – Financials, Energy, Health Care, Consumer Goods – my favorite episodes are usually financials and consumer goods. 

Finally, there is a brand new podcast they recently launched: Rule Breaker Investing with host Dave Gardner (one of the Fool founders). Have you ever wished you would have bought shares in Amazon, Apple, and  Google soon after they became publicly traded? Well, this is the podcast for you. It is quickly becoming a favorite. Talking about this awesome podcast wouldn’t do It justice. Please set aside 10-15 minutes of your time this weekend and listen for yourself.


Entrepreneur on Fire – John Lee Dumas

I came across this podcast at some point last summer when I was living in Washington, DC. I became a fan almost immediately. The show comes on daily and provides us with a daily dose of motivation. The host interviews very successful entrepreneurs (people making over 6 figures in very creative ways) and gets inside their heads to make them share all- pretty much no question is off limits. I love John's interviewing style and positive attitude with interviewers. He also takes the time to talk about his own experiences and opinions on various topics. 

He immediately asks guess HOW they make their money and is not afraid to get ‘intrusive’ (for lack of a better word). Gotta’ love it. This is yet another super inspirational podcast. Unless all ~900+ of his guest are lying about how they make a living, I have concluded that if all those people can do it, I am no exception.


And that’s all folks. Those are the podcasts I listen to regularly and I have to admit I have gotten and continue to get GREAT value from the content. They all cover topics I am passionate about –Investing and Entrepreneurship being at the top of the list.

Its been a while since I wanted to share this post with everyone. Glad I finally got around to doing so. I encourage you to download a few (or all) of the podcast, listen for yourself, and let me know what you think!

Have a healthy and productive weekend. 

Cheers to profits,

Wednesday, July 1, 2015

A Closer Look at a Watch List Stock: L Brands (NYSE: LB)

Some time ago I heard a saying that made absolutely perfect sense- when you enter in to a business you can be an employee, a consumer, or a part owner. When that business sells goods at considerably high price points (at least for the average consumer) and loyal customers still make the purchases without blinking, being a part owner becomes an extremely attractive proposition. 
L Brands has been on my watch list for about a year. I decided to dig deeper in to this company for more information and here is what I found. 
The Business
The name of this company may not look familiar at first glance but is actually the parent company of wildly popular retailers including Victoria Secret, PINK, Bath & Body Works, Henri Bendel, and La Senza (Canada-based Lingerie Company).

As specified in their annual report, the company's competitive advantage comes from:
-Strong brand recognition
-A very loyal customer base
-Frequent and innovative launches of products and apparel (including perfume, lingerie, sportswear, and other fashion items sold specifically at the Victoria Secret and PINK divisions).
As of January 2015; L Brands had a total of 2,685 stores including licensing agreements and franchises within the U.S and around the world.

Something that is very notable about this company is its management. CEO Leslie H. Wexner has actually been Chief Executive Officer of Victoria Secret since he founded the company in 1963 and has been chairman of the Board of Directors since 1975. Mr. Wexner is now 77 years of age. Next in tenure is also Chief Executive Officer and president, Sharen Turney, 58, who has held her position since July of 2006. This talks to the level of commitment at the helm and management that stays the course, tied to the success of the company and its continuous growth and success over time.
The most profitable segment in this company is Victoria Secret followed by Bath & Body Works.

Fiscal Year 2014
For full year 2014, the company achieved the following:
  • 1. Net sales of $11.454 Billion (an increase of $681 million in comparison to 2013)

  • 2. Comparative store sales across all stores in North America increased 4% year over year

  • 3. Operating Income increased from 16.2% in fiscal 2013 to 17.1% in 2014, this was as a result of growth across all segments

  • 4. Earnings per share increased by 15% to $3.50

  • 5. Capital expenditures of $715 million which included $553 million for opening new stores, remodeling, improving existing stores.
Specifically for the Victoria Secret division- Net sales increased $323 million to $7.207 billion. Comparable store sales increased 3%. Significant boost in net sales results include net sales increase of 6% within PINK stores as well as strong performance in core lingerie and sportswear driven apparel. Results were offset partially by a decrease in sales of beauty products due to exit of the makeup category.

Strategic Moves: Discontinuing make up line
In March of 2014; the company announced plans to discontinue the make-up line along with some low-selling categories within apparel. 
The goal of eliminating such divisions is to allow L Brands to zero-in to boosting sales of their more profitable businesses and products including swim and sports apparel, loungewear, and fragrances. As per CEO, Ms. Turney, those businesses together with the core lingerie business and Pink Brand are the fastest growing and most profitable categories within the company.
Despite the elimination of said categories, the Victoria Secret division still ended fiscal 2014 with net sales increase of 6% due to the performance of PINK, core lingerie, and sportswear- driven by a compelling assortment of merchandise that incorporated new and fashionable product offerings which succeeded in attracting consumers and hence, increasing same store sales. In store execution and improved operations also contributed to the results.
Valuation and Financials
L brands currently trades at 22.8x forward earnings with a 5 yr MA of 18.5x. Current P/E stands at 22.87. Compared to its closest competitors, L Brands may seem a bit on the pricier side. Below are valuation numbers for Gap Inc. (NYSE: GPS) and Hanes Brands Inc (NYSE: HBI)
Direct Competitor Comparison
Market Cap:
Operating Margin :
Net Income :
*Information adapted from data on Yahoo! Finance and Morningstar.
Important to keep in mind that companies like Victoria Secret's have a type of branding that is incredibly strong. Theoretically, in some consumer's mind- especially those of very loyal customers, there may not be an exact replacement or substitution. For Bath and Body works its closest competitor is The Body Shop, however, that company is not publicly traded.
As of January 31st 2015; L brands had about 1.6 billion of cash on hand and 4.7 billion of long term debt, majority of which are promissory notes at fixed interest rates, as per the annual report for fiscal 2014. Although debt may appear high, looking back year over year, debt has remained fairly consistent with no significant spikes, which is something to note. The company also specifies their capital expenditures are increasing as part of their strategies for expansion and growth (explained below).
Company has an annual dividend yield of 2.30% ($2.00 per share).

Strategies for Growth
Many probably ask themselves- can a company like L Brands with its multiple divisions maintain their strong branding position for many years to come? This is a valid question that all prospective and existing long term investors should in fact explore.
To answer some of investors questions in regards to long term profitability, L brands outlines clear and concise strategies for sustaining their popularity and continuous growth going forward. Plans of action include:
1. Growing the business in North America- Specifically for Victoria Secret, the plan for full fiscal 2015 is to increase square footage of stores in N.A by about of about 5% through expansions of existing stores and the opening of approximately 26 net new Victoria Secret stores (21 in U.S, 5 in Canada). For Bath & Body Works; the plan is to increase square footage of stores in N.A. by about 3% and the opening of 24 net new Bath & Body Works stores (14 in the U.S and 10 in Canada). Company is also making investments to improve e-commerce venues- which all stores have. The online channel for, specifically, continues to exhibit significant growth year over year.
2. Extending Core Brand Internationally- L Brands see a lot of opportunity at the international level and has actually assigned dedicated teams for the task which have taken a methodical "test and learn" approach to expansion outside of the U.S. International expansion began with the acquisition of La Senza back in 2007. L brands also continues to expand their partnering agreements with small-format stores around the world as well as at airports and other various locations. This allows for the exposure of the Victoria Secret name, and branding of most profitable segments, to continue strengthening worldwide.
3. Focus on the business fundamentals including efficient and disciplined management of inventory, expenses, and capital- The Company has dedicated strategic efforts to improving efficiency within operations all across the board and for all brands within its umbrella. Focusing on the fundamentals includes a special attention to the customer and their preferences, paying close attention to core merchandise categories, inventory management, speed and agility, and store selling and execution.

Final Thoughts {Would invest in this company?}
After taking a closer look at this company as an investor rather than a consumer, I do see some promising long term benefits of owning the stock.

I was just thinking about this-- a $350 shopping spree at this store (which is what a lot of people easily spend there) can buy approximately 3-4 shares at today's prices (currently trades at ~$85.87 per share). It may not sound like much but taking in to consideration stock price appreciation plus dividend reinvestment over time, this can be a nice addition to a portfolio.

I really like their strategic plans of action which includes expanding and strengthening the most popular brands at an international level. I also liked that the company identified less-profitable divisions and decided to eliminate them in order to focus in the parts of the company that make it profitable.
Going forward I'll be keeping an eye on continuous growth in same store sales and whether the increase in square footage and number of stores across the U.S is in fact profitable over time. I would zero in on sales, profits, and gross margins year over year. 
Another thing I am curious about is L Brands succession plans- CEO Wexner, which has been there from the beginning, is in his late 70s.

I am not ready to buy shares as of yet and would likely wait for a market pull back of sorts before I make the plunge. The price is about 10% under its 52-week high and, although the dividend yield is at a nice 2.30%, I am a little weary of the 97% dividend payout ratio and would like to look a bit more in to this.

It was very interesting to examine this company as an investor rather than a consumer and look forward to keeping an eye on developments.

If the company makes the plunge from my watch list in to my actual investment portfolio, I will be sure to you all informed.

What are your thoughts?

Thanks for reading and cheers to profits!

*I have no shares in any of the companies mentioned in this report. 

Wednesday, June 10, 2015

Recent Buy: Facebook (NASDAQ: FB)

One of my investing strategies, as discussed in my previous post, is to invest in companies that have a strong competitive advantage and very minimal (if any) competition within their respective industries. I also like to look at companies with a strong network effect. As per Investopedia:
"[network effect] a phenomenon whereby a good or service becomes more valuable when more people use it."

There is no doubt that Facebook (NASDAQ: FB) has become a phenomenon all around the world. I still remember when I was first introduced to Facebook in 2004 while still in college. I would have never guessed in my wildest dreams that the website would become as valuable as it has.  
When the company first introduced its IPO in May of 2012 I was very skeptical and decided to stay away. Despite the website's popularity, I was unable to see a clear picture of how exactly this "free website" would make money for investors. I failed to recognize (back then) the potential that came from driving revenue from advertisers, marketers, developers, and from the users themselves.
I took some time to do my own research and analysis and decided to start a small position in this company about a month ago. Below are some of the factors that I found most notable and promising and why I've become a shareholder.

I. Significant growth in revenue year over year
I'll start by talking about top line growth, or revenue, for the most recent quarter (first quarter of 2015), which came in at $3.54 billion, a very healthy 42%year over year increase in comparison to the $2.50 billion reported during first quarter 2014. Diving in to a more specific breakdown; revenue from advertising (which is Facebook's main driver of revenueincreased 46% year over year. Mobile advertising revenue (in simpler terms, revenue from people using Facebook from their smart phones) represented a staggering 73% of the total advertising revenue, an increase of 59% on a year over year basis.
The increase in revenue is not an outlier. Facebook has been reporting healthy revenue increases year over year since becoming publicly traded:

QuarterRevenueYear over Year Increase
Second Quarter 20121.18 Billion32%
Second Quarter 20131.25 Billion53%
Second Quarter 20142.91 Billion61%
First Quarter 20153.54 Billion42%
*Data obtained from FB investor relations website, financial press releases.

II. Exciting uphill trends in Facebook's Daily & Monthly Active Users
If you were wondering whether the above noted data makes any sense; it may be good to look in to how daily active users coming from mobile are increasing quarter after quarter. Facebook reported that DAU (number of people using Facebook daily) increase by 17% year over year to 936 million people. Monthly active users increased 13% year over year to 1.4 billion.

When we look at mobile active users is when things really get interesting. If you take a closer look at FB quarterly reports, you may notice the company didn't officially start reporting number of Mobile Daily Active Users until 2nd quarter 2014 (the metric was originally embedded within daily active users numbers and reported on a monthly basis). I can only deduct that this metric has become too important to ignore and thus, it has earned its own special category in Facebook's earnings reports.
For first quarter 2015; Mobile daily active users came in at 798 million on average, an increase of 31% year over year. Mobile monthly active users came in at 1.25 billion, also increasing by 24% on a year over year basis.

III. The Future of Mobile: Why is growth in Mobile revenue important?
A 2013 study by International Data Corporation (IDC), found that 79% of the population keeps their smartphone at arms length for about 22 hours per day. The data shows that eventually, about one out of four people will have their phones at arms length 100% of the time. In terms of what are exactly people doing with their phones- 16% of the time is spent on phone calls while 84% is spent on other activities including browsing the web, email, social applications, watching videos or playing games.
The same study showed that after checking their email, people spent most of their time on their Facebook application. As per the IDC, while 78% of the time is spent on email, 70% is spent on Facebook for those people with a smartphone.
It is expected that by 2018; mobile data traffic will increase at an annual growth rate of 61%.

IV. The Future of Marketing and Advertising
The marketing budget of mayor corporations allocates only a very small percentage to Facebook advertising representing tremendous amount of opportunity for further revenue growth as companies catch up to rapidly changing times in advertising techniques that may be more efficient, strategic and may provide a more significant return on investment.
research study conducted by Mondo entitled: "The Future of Digital Marketing", released in January of this year, showed that 80% of companies plan to increase their digital marketing budgets within the subsequent 12-18 months. The demand for hiring the best talent within this niche is reinforced by the findings which indicated that the top skills companies are looking to hire for this year includes digital/social (54%), content creation (44%), big data/analytics (33%) and mobile strategy (30%). The way things are moving in this industry, I can only see these number continue to ascend in the years going forward.

V. Other factors to consider

  • Where is the Money going? Research & Development
The hefty increase in cost and expenses reported by the company in the most recent quarter may scare many. There is no denying that Facebook competes within a fiercely competitive technology industry and it's ability to maintain its competitive advantage significantly depends in it remaining relevant and innovative. Hence, it should come to no surprise that the company spends heavily in hiring talent that is able to develop new products and/or maintain an infrastructure that is constantly providing value for the customers Facebook serves including users, marketers and developers.
The company reported a 88% increase in R&D expenses year over year from 2013 to 2014. Same was attributed to the following: "The increase was primarily due to an increase of $724 million in share-based compensation expense compared to 2013, and an increase in other payroll and benefits expense resulting from a 48% growth in employee headcount from December 31, 2013 to December 31, 2014 in engineering and other technical functions. Share-based compensation expense also increased due to the acquisitions we completed in 2014."
Facebook relies heavily in human capital and thus, these type of expenses do not scare me and should not deter you either. Without solid talent, the company would be unlikely to continue growing to its utmost potential.

  • Valuation
The stock's current valuation may come across as too rich for many. Company trades at a P/E of 80x earnings, forward P/E of 32.4x earnings and the stock price is at about 4% from its 52-week high. For comparison purposes, the S&P 500 current P/E is at a ballpark of 18.5x earnings. In terms of companies in a 'similar' industry (because, lets face it, there is really nothing like Facebook) Google's (NASDAQ: GOOG/GOOGL) currently trades with P/E of 26.5X earnings and forward P/E of 16.5.

Final thoughts 
Based on extensive amount of research, it is my opinion that Facebook presents solid upwards potential, especially for long term investors. The company is well positioned when it comes to mobile usage and what they can offer advertisers. The face of marketing is changing drastically and when corporations fully catch up, Facebook will be there to benefit.
Although the company's costs are increasing rapidly, the continuous strategic investments in research and development is something that is indispensable to ensure the company remains competitive, continues to grow, and remains a leader within its industry.
As with any company, no success is ever guaranteed and no one has a crystal ball about what the future may bring. I'll continue keeping an eye on trends including daily active users across the board, revenue growth, and how the company spends their money- either through strategic acquisitions and/or continuous improvement of the company's infrastructure to better serve all different segments in which Facebook is involved. As long as my original thesis for this company stays the same, I may continue adding to my position during pull back and/or market corrections.

Tell me, what are YOUR thoughts on Facebook as an investment?


Disclosure: LONG on FB, GOOG/GOOGL
*Never invest or cease to invest based solely on the information provided on this blog.