Facebook @26+: Investor Shift
Jane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Will historians of equities be creating a timeline of Before Facebook's (NASDAQ: FB) IPO and After Facebook's IPO? Part of that tale may or may not be the death of equities. In its recent cover story, THE ECONOMIST has been among the influentials describing the public company as an endangered species.
The death of equities is mere speculation. What we do know is that any analysis of equities will include a detailed description of a recent key investor shift. That has been the change by some from a preoccupation with discovering the disruptive next new thing to an assessment of the what-is and if that what-is can be maintained and grown. The new buzzword has become “sustainable.” The presence or absence of that has been factored in the assessment of just about everything from the value of the global expansion of Staples to investor loyalty to The New York Times Company sans dividend.
Of course this re-framing predates the ongoing mess of the Facebook IPO. Sometime on Thursday the stock actually hit a low of 26+. Could it go into freefall? That now seems possible. In essence, the shift reaches back to at least the Facebook S-1 Registration. Investor fans eyes popped. They noted that revenue wasn’t increasing at its earlier rate and the threat from mobile to an advertising medium based on the web. Maybe, some wondered, the only aspect sustainable was the cultural phenomenon of Facebook. That could prove out to not necessarily be a source of revenue. Many of us loved the cultural phenomenon of Webvan but there turned out not to be money in it. The web company delivering groceries went bankrupt in 2001. Could Facebook?
Signs of this flight toward sustainability are sprouting just about everywhere. No slouch when it comes to framing his decisions in a persuasive manner, Berkshire Hathaway’s (NYSE: BRK-A) Warren Buffett recently leveraged that sustainable/unsustainable dichotomy. He did it as he discussed his purchase of General Media’s 63 newspapers. Buffett said that free newspaper content was “unsustainable.” Therefore, all would be jolly fine with the General Media venture because paywalls would be erected. That argument might not have worked as well as he hoped. Many of us know that media properties such as NEWSDAY LLC had put up a paywall and few showed up to pay.
Another sign of the emphasis on sustainability is increased investor scrutiny of the great disruptors such as Apple (NASDAQ: AAPL). For example Motley Fool analyst Tim Beyers questions why the company hasn’t expanded its iTunes platform beyond its current niche into an all-purpose tool for other mobile transactions such as debit cards. Beyers isn’t alone in his criticism. The stock is at 562.29, with a 52 week range of 310.50 to 644.
Given this flight from the church of disruption, likely today an executive in a boring, predictable company like PepsiCo (NYSE: PEP) couldn’t be lured to a technology company as had John Sculley. Machiavellian genius Steve Jobs fingered Sculley’s vulnerability when he taunted him with the notion that he could spend the rest of his career hawking sugar water. More probable is that the executives at Pepsico are thanking their lucky stars they’re in such a stable environment. Even with the investor disappointment in the leadership of the CEO Indra Nooyi, the stock is at 68.64, with a 52 week range of 58.50 to 71.12. Some contend that it is undervalued but that could be less undervalued than Facebook’s could become. You bet, boring has become beautiful.
In evaluating new stocks such as the coming split of Kraft (NASDAQ: KRFT) into global snack and North American groceries, investors will likely eye what level of growth can be maintained for each of the two separate companies. Not so much at issue could be that snacks will have a higher rate of growth as what percentage can groceries sustain and add to in an environment of rising commodity prices and fierce competition from private label. Right now investors seem positive, with the stock price at 38.57, with a 52 week range of 31.88 to 39.99.
Investors aren’t just locked into the equity model, of course. There are many other ways they can fund companies including private ones. This attention to sustainability, for example, could spill over to the decision-making of venture capitalists. The high tech sector could find itself out in the cold and the next cupcake company with a sustainable gimmick such as Biblical themes and characters get the funding.
janegenova has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Facebook, and PepsiCo. Motley Fool newsletter services recommend Apple and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.