Social Media Can Be Antisocial Toward Investors

CHARLOTTE, N.C. ( TheStreet) -- Lately investors in the social media sector probably have felt as though the the stocks have been very antisocial toward them.

Obviously, social media Web sites have great public appeal. But just because you can get people to sign up for your Web site doesn't mean you can monetize that interest and make a profit.

Two social media stocks that have captured the public's interest have also taken some abuse.

The problematic Facebook ( FB) IPO is still getting media coverage every day, and as you can see from the hourly trading chart below provided by Barchart.com, the stock has taken a beating.

The underwriters supported the stock on only the first day till they could get the stock out of their inventories and into the public's hands, and then they laughed all the way to the bank. Down and down it goes and where it stops nobody knows.

Some investors were lucky enough to get in on the LinkedIn ( LNKD) IPO and made some nice gains, but later investors have had mixed results as the stock is still trying to find its legs. Since the IPO, weekly prices have been all over the place, as the following chart from Barcharts.com shows:

So how do we make money in this sector? Again I go back to my four criteria:
  • Projected growth in revenue
  • Projected growth in earnings
  • Recent price momentum
  • Solid balance sheet

One stock I found was LivePerson ( LPSN), although it's not really a social media stock in the same way that Facebook is. Over the past year, the chart shows steady price appreciation:

source: Barcharts.com

This stock has outperformed the market impressively. The chart below shows that LivePerson is up 64% over the past year, while the market, represented by the Value Line Index, is down 3%.

source: Barcharts.com

Although LivePerson is not a Web site where people meet and communicate, it does facilitate customer interaction on business Web sites, and it does provide social media services and advice, so in that sense it's "social."

The company helps businesses interact with their customers in real time with chats, voice/click-to-call, emails and more.

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