Sunday, September 28, 2014

My hate/love relationship with Twitter...

Sure, I (often) brag about trades that went great, but sometimes there is that moment when you find out that you were entirely wrong about a company and its stock. To be honest, also that needs to be addressed I think. Twitter is one of those trades that went horribly wrong for instance. Back in November of last year, when Twitter launched its IPO, I couldn't be more skeptical. In fact, if you read the post I wrote you'd think Twitter would be out of business by now. Boy was I wrong. I should've bought it instead of going short, but luckily I had my stop-loss so my financial losses weren't that great, but still... I could've doubled my investment!


It turned out that Twitter is indeed worth its stock price. I switched to the other side and am now very bullish, although it wasn't that long ago when I was still very bearish about this company. At the end of July (as you can see on the chart above) Twitter's stock price surged and that was my conformation that it wasn't all just a hype, this stock is truly a gem. Sure I've been wrong before of course, but what was is that made me think Twitter's stock  would tank?

Risk

Any IPO carries some sort of risk. Although that's the case with a stock has been trading for some time, an IPO has that extra risk attached to it. This is mainly due to the fact that you don't know how the market will react to the newcomer. In Twitter's case, it wasn't making any money. The future prospects weren't all that rosy either with, to me, a vague businessplan and noone seemed to use Twitter as intensively as Facebook or G+ for instance. I even uttered numerous times 'how many users are actually human and not duplicate robot (automated) systems with a Twitter profile?'

Popularity

It turned out there were much more people interested in Twitter than I initially thought. It's true. Every (important/famous) person seems to have a Twitter profile. You can even follow TV shows or sporting events on Twitter with a Smart-TV that has that integrated feature... major! I should've seen that Twitter is much more prominent. That's where I went wrong. 

Lesson learned: do not short populair IPO's but rather wait a few weeks or months to see if the company can uphold its stock price.

Am I a buyer?

Interested, but not at this price. I think I can get a way better deal after a pullback but I definately want Twitter in my long term portfolio!

By: +John van der Munnik 

Disclaimer:

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