Facebook: If I'm So Smart, Why Do I Feel So Stupid?

NEW YORK (TheStreet) -- I'm going to let you in on a little secret: I'm not as smart as you think I am.

Now as hard as that may be for you to accept, imagine the disappointment I'm feeling at this moment with myself after just now figuring this out. In a span of three days, I was both one of the smartest men alive, and one of the dumbest. Am I just being too hard on myself or will time eventually restore my intellect?

My Job and My Insecurities

Last Tuesday, I announced selling my position in social media giant Facebook ( FB) at a price of $31.20. So what, you might say. However to me, it was a brilliant move highlighted by the fact that I had perfectly timed the bottom after having bought the stock at a price of $25.72 -- resulting in a 22% gain.

However, on Friday, the stock closed above $33 yet with no meaningful signs of slowing down. You see where this is going. On one hand, I think I'm being too hard on myself because a 22% gain in just 10 days is nothing to take lightly. However, missing the top and leaving an extra 7% on the table has a way of introducing doubt to one's own analysis.

Am I caring too much about being right and not enough about being wise?

For me, the situation has (somewhat) conflicting interests and I'm not sure on which I should focus more of my energy. I am both a writer and an investor -- in essence requiring two separate standards on which to be judged.

You, on the other hand, get the benefit of both without having to really distinguish which standard you are judging me on. Though I think that's unfair -- I accept it. You see, I am in constant need to excel at both, even though I realize that to do both perfectly is impossible. In fact, this split focus could impair my rate of success at either one. Maybe I'm being a bit too insecure -- but that's my problem.

Does the Substance Ever Stick?

As with Facebook, I write extensively about both Apple ( AAPL) and Sirius XM ( SIRI) to the extent that I consider myself an expert on both companies.

Take Sirius for example. Last Monday, I outlined why it looked like the time was approaching for the company's CEO Mel Karmazin to again sell some of his options and I asked if investors should buy in anticipation. Two days later, he sold 7.6 million shares. I felt I did readers a service by being right.


As for Apple, my recent prediction that it is about to dominate the automobile was not at all appreciated by some readers -- particularly those who are investors of Sirius XM as well as Pandora ( P). When Apple announced that it was ditching Google ( GOOG) in favor of its own in-house mapping system, I took it a step further and realized that Apple was now communicating directly with commuters. Essentially, it has gotten into the driver's seat.

I said this because first, it doesn't take a genius to see that the IP platform is dominant now as it currently connects every mobile device such as smartphones, tablets, video games systems and even your television. Yet it is only starting to grow, as vehicles are now being manufactured with their own IP addresses already built in.

So with Apple having already designed its "mobile OS" for the upcoming release of its iPhone 5 -- where it has also integrated Facebook -- it makes sense that it might become the navigator of the automobile (along with its Siri voice control system). Automobile integration also looks likely to be the future driver of the company's growth and stock price.

In other words, when the smartphone market ends, the introduction of the "smartcar" market begins. That seems to be the trend and the logical next step -- at least according to my analysis.

I was right about Sirius shares. For Apple's dominance perhaps I'm going out on a limb. Some would say in both cases I'm merely throwing the topics to the wall to see if they stick.

Be that as it may, my job as an analyst and writer is to be right. Hopefully in the process I'll appear smart if I've helped readers make decisions that they otherwise likely might not have made or consider possible outcomes that might have gone ignored.


So I return to the letdown I'm feeling with my Facebook trade -- one where it seems it's only going to get worse.

Going Back to the Party?

On Friday, TheStreet writer Chris Ciaccia offered some compelling reasons for believing that Facebook's stock had 25% more upside left -- this after it had already gained 23% at the point of my sale.

At this point it is hard to disagree with Chris, however my trade was predicated on the tenet that "greed" has never worked as trading strategy -- at least not for me. I understand that on Wall Street as in Vegas casinos, in order to make money one has to always be willing to leave money on the table.

What appears that have worked against me in this trade is the fact that Facebook, unlike other stocks, does not yet possess sufficient trading history to offer investors an adequate gauge of exit opportunity -- particularly from a technical point of view. However, that does not appear to matter for analysts who have recently become bullish on the stock. Ciaccia pointed out that Nomura analyst Brian Nowak initiated coverage on the social networking giant with a "buy" rating while setting a price target of $40.

Furthermore, he said despite near-term issues and concerns about being able to monetize its 900 million users, Facebook can reach his target by charging for branded pages, improving its advertising units and generating revenue from mobile.

This comes on the heels of Mark Harding of JMP Securities, who thinks that the stock is heading to $37 upon initiating coverage with an outperform rating. He cautioned that the "valuation appears high, but Facebook has plenty of opportunities to monetize its vast user base."

Essentially, I've sold too soon as the stock is now believed to be heading higher. The question is, should I now focus my energy on trying to get back in? Will this be another mistake and risk buying higher or should I wait for the stock to drop below my recent sell price? What will come first?


For every investor who arrived too early to the Facebook party, there were investors like me that arrived right on time. Only now I'm getting the sense that I might have left too early before the real fun began.

Bottom Line

In recent emails that there were quite a few readers that not only simulated my recent trade but possibly (as I am) are feeling a great deal of regret. To those readers let me offer my sincerest apologies, as I feel that I have let you down. I hope to make up to you somewhere down the road.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

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