This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How My Contrarian Bet On Facebook Paid Off

Stocks in this article: FB GOOG JNJ

By Daniel Beckerman

Since the Beckerman Institutional Asset Allocation portfolio inception a little over a year ago, we have achieved returns of about 16% (net of fees) over the last year as of August 8. Much of this return was fueled by positive returns in the U.S. stock market.

The S&P 500 Index (SPX) has continued to march into record territory. It was the alternative sorts of assets that we own that inhibited performance in our strategy.

However, I am building more conviction in these asset classes as they have become cheaper. Internationally, Europe is beginning to show some signs of bottoming.

Although, several emerging market countries have suffered from macro-economic headwinds (such as China and India), there is an abundance of opportunities all across the region.

Interestingly, some of the best performing US companies that I have owned, including Google (NASDAQ: GOOG), Johnson & Johnson (NYSE: JNJ), and more recently Facebook (NASDAQ: FB), are exploiting opportunities there. In my opinion, after our multi-year stock market run, the U.S. market no longer looks cheap.

The developed international and emerging market stock markets look cheap in contrast. Some of our more recent additions to the portfolio were international equities, ETFs with bank exposures, and shares of FB. I believe that in future years, international equities will act a diversifier and add to risk adjusted performance relative to the S&P 500 index.

I sold out of high yield bond ETFs and replaced them with bank loan ETFs. The reason is that there is no longer much of a margin of error in high-yield bonds. If you have a period of economic instability, the yield that you get in this asset class, overall, may not compensate investors for the default risk.

Bank loans, by contrast, have higher recovery rates in the event of defaults and they tend to be higher on the capital structure. Another key differentiation is the fact that bank loans become more valuable as interest rates increase. This is the opposite of most bonds including high yield bonds. When you are in a rising interest rate environment floating rate loans tend to do much better than other kinds of bonds.

I bought FB with the expectation that investors had become overly pessimistic on the stock. This surprised me because investors went from being very pessimistic on the stock to enthusiastic within a month.

Also, I rarely have experienced that kind of return in that short of a time frame and, although it would be great, I do not expect to replicate that going forward. The bulk of our strategy is designed to generate a favorable long-term return by being invested in the right asset classes while using some clever ideas to do it.

The investments discussed are held in client accounts as of July 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.


Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs