NEW YORK (TheStreet) -- While I dislike most low-priced cult stocks, I absolutely adore misunderstood stocks. When they experience weakness, the words "buy on the dip" become more than just a mindless tout.
On Tuesday -- and for the second time in recent weeks -- the stock sold off hard. This time investors unloaded shares after Zynga made several announcements at its "Unleashed" event.
Zynga intends to make its games more social and accessible across devices and, maybe most importantly, away from the
platform that catalyzed its success. For a complete summary of what Zynga announced at "Unleashed,"
Just like the one that took ZNGA below $5.00 earlier this month, this selloff is overdone.
After hitting an all-time low of $4.78 on June 12, ZNGA rebounded to trade as high as $6.16 on the 25. That's about 29% worth of upside. I saw that coming and added to my position aggressively under $5.00 and a bit more just above that. My cost basis now stands at $5.57. The stock retreated all the way back to $5.77 at Tuesday's close. That's absurd.
Because I took advantage of the earlier weakness, I will most likely just stand pat with what I've got. That said, this selloff could represent another buying opportunity. There's no doubt about it if it intensifies. And, if we see sub-$5 again, ZNGA, yet again, becomes a screaming buy.
Many investors, and
Bill Griffith illustrates this, simply cannot wrap their heads around the type of business model companies like Zynga and CEOs like Mark Pincus employ. In a
, Griffith railed Pincus about his company's stock price. Pincus, who comes off as a tad socially awkward, did a less-than-stellar job responding.
But, at day's end, Pincus could have pulled Ph.D.-level rhetorical speaking skills from his back pocket and Griffith still would not have understood.
I'll pull the great wordsmith Haruki Murakami from my back pocket and simply say, "If you can't understand it without an explanation, you can't understand it with an explanation".
As much as I dislike simple dichotomies, I really believe that more than half of the investing public and media/analyst community simply does not get Zynga. They do not get Facebook. And for the last 13 years, they have been unable to muster the intellectual capacity -- or expend the least bit of effort -- to comprehend Jeff Bezos and the magic he consistently orchestrates at
. They likely never will, no matter how hard guys like me carry the torch for the visionaries behind perpetual start-ups.
Companies such as Zynga and Facebook, for all intents and purposes, embrace the Bezos/Amazon model and culture. For years, Bezos has had to answer the same questions from relatively old-school reporters like Bill Griffith. When will you turn a profit? Why do you spend so much money? What's up with the stock? It's the same tripe guys like Pincus and Mark Zuckerberg have to deal with day-in and day-out.
They've got their heads down. They're building something. Their lives do not revolve around making themselves look good in front of a camera and an audience with "hard-hitting,
questions" and pre-rehearsed answers. That's what talking heads such as Bill Griffith do. He's good at it, no doubt, but he'll miss the boat on Zynga just like he probably did on Amazon.com.
How much do you want to bet that reporters put Bezos in the same spot Griffith put Pincus in on Tuesday? Flash back to 19-freaking-99 and this exchange
Do you have a goal for when you can throttle back on expenses and become profitable?
Our strategy is very, very clear: We're focused on long-term returns for investors. And to throttle back on investment now would be shortsighted. When we have less opportunity that will probably happen. But as long as we have lots of opportunity, we're going to continue to invest commensurate with that opportunity in a very disciplined and methodical way, but in a long-term context. To do anything else, we believe, is irrational.
It's been 13 years and about 306% worth of stock price appreciation and that explanation still makes no sense to AMZN bears.
So, it should come as no surprise when these same types of folks can't make sense of these lines from Mark Zuckerberg's recent letter to investors, included in the company's
By focusing on our mission and building great services, we believe we will create the most value for our shareholders and partners over the long term -- and this in turn will enable us to keep attracting the best people and building more great services. We don't wake up in the morning with the primary goal of making money, but we understand that the best way to achieve our mission is to build a strong and valuable company.
It also shouldn't befuddle you when this same type of investor can't seem to process what
CFO Steve Cakebread told me in an interview from January of this year. I paraphrased Cakebread's thoughts
Pandora is in rapid growth mode. And fast-growing, pioneering companies that are disrupting industries risk sacrificing long-term profitability and sustainability by not investing enough in the business early on just to achieve profits. While you cannot spend recklessly, you have got to spend. In other words, by not spending today to grow in the name of profitability, Pandora could very well not position itself properly for the long haul.
Cakebread fits nicely at Pandora, given that the company's founder Tim Westergren often echoes the same type of statements we hear from fellow visionaries Bezos, Zuckerberg and Pincus.
With that in mind, investors should consider buying shares of Pandora on weakness. You get as many, if not more, chances to buy weakness on P as you do ZNGA.
Word comes of ominous threats to Pandora's dominance almost daily. Just Tuesday night,
announced on its Web site
a partnership with
, triggering an after-hours pullback in Pandora. If the weakness continues through the week, particularly if it takes the stock below $10.00 again, it also becomes a screaming buy on weakness.
To review part of my bull case on Pandora, see
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, the author was long FB, P and ZNGA.