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Tuesday, May 15, 2012

Why You Should Not Buy Facebook Stocks

Facebook, a giant internet company that focuses on social networking, will be listed in NASDAQ on May 18 with ticker FB. Averaged share per price estimated $30 - $50. It's pretty expensive. Many people are interested to buy its stock, but I am not, and these are my reasons.

1. I follow Ben Graham theory, don't buy tech stock. It's also applied by richest investor in the world, Warren Buffet. Tech bubble in the late 1990 is one of explicit example not to buy tech stock. 
2. Tech industry is over crowded. There were already many tech companies in America compete in the industry. Each company has great innovation, and that's characteristic of technology - very dynamic. Those companies have advance innovation, are the winner. See RIMM, because of their network business fail, finally this company is passed by Android and iPhone. Their highest stock price was over $100 but today under $12. Analyst even predict that its stock price will be lower than that.
3. Facebook is internet company, and internet business model is very competitive. There were many websites with similar concept like Facebook. You know Friendster, right? It's famous social networking site in the world in 2000s, an independent survey agency even said that eight of ten people in Asia had account on Friendster. However, because this site has poor features than Facebook, and finally this site is passed by Facebook. Friendster was failed, they changed concept of the site become gaming center site.

Based on my reasons, tech stock is not my favorite. So, I won't but FB shares although the site is world's leading social networking site. However, if you do believe Facebook has brightest business in the future, Facebook share is must have for your stock portfolio.