As a social media company Facebook (FB) has a lot of spotlights shown on it whether for good or for bad. But as a part of everyone’s daily life the company realizes that it is a big part of society and can be pulled into civil situations which it never intended to enter because of its ubiquitous nature. One such high profile case that the company was pulled into recently was regarding the search warrant for its customer base and I’d like to examine what it might mean for the company.

In a recent Social Security fraud investigation the company was dealt search warrants where the authorities required that the company turn over information on Facebook’s consumers. While performing their due diligence on disability services the government noticed that among some of the perpetrators were individuals who had filed for disability services but had Facebook profiles that appeared to show they were perfect health relative to the disability they were applying for.

The government naturally asked Facebook to open their files on particular individuals and Facebook obliged, but obliged reluctantly by challenging the search warrants. Facebook filed the motion in the Court of Appeals in New York but lost on the ruling predicated on the notion that it actually had no right to an appeal on the situation.

You can only imagine that Facebook is upset about the ruling because if any agency now comes knocking on the door it must come to the door and open. So from a trading perspective what this ruling implies is that if the mass consumer realizes that their online presence isn’t really secured they will not be utilizing the platform all that much anymore. With a less captive audience Facebook will have less opportunities for ad dollars.

This bit of news brings me back to the San Bernardino shooting which occurred almost eighteen months ago when I’m reminded of when Apple’s (AAPL) Tim Cook fought vehemently fought against authorities in unlocking the shooter’s iPhone because if he ended up unlocking the phone this one time it opens Pandora’s box in the future of having the government ask corporations to invade people’s privacy more often. All the social media giants and tech companies were united on this front with Tim Cook in an effort to protect the online privacy of their customers so this situation where Facebook allowed authorities to come into their house for the information in this case surprises me actually.

Though the appeals court said Facebook had no authority to file the appeal there is one aspect of the decision that remains unanswered. The part that remains unanswered was whether or not the warrants were actually issued properly. The Stored Communications Act of 1986 is what leaves this door open. The act addresses what happens in the disclosure of stored electronic communications and transaction records held by internet service providers. I will not delve into the legalities of the situation because I’m not a lawyer, but to me what this means from an investing perspective is more important.

As I stated earlier, if Facebook’s broad audience begins to feel that the company is not protecting their online privacy they will more than likely jump ship to, say, the Snapchat platform or get off of the grid altogether. My gut feel is that this is a very minimal risk at the moment because it wasn’t an overly publicized case. Had the warrants been issued due to a terrorist threat or something along those lines I would have to reassess the risk.

I actually initiated my position in Facebook in late November and have been pretty happy with the purchase thus far. I will only be purchasing shares if they are below $12 because I believe that is where Facebook offers additional value. I've selected $121 because it is my cost basis. I do believe that shares offer value below $125 as well as that is the midpoint of the 52-week range.

I swapped out of Priceline (NASDAQ: PCLN) for Facebook during the 2016 fourth-quarter portfolio change-out because I ended up turning a profit in the name (32.7% or 33% annualized) and wanted to lock in those gains. Since the swap, Facebook has been performing a little better than Priceline. For now, here is a chart to compare how Facebook and Priceline have done against each other and the S&P 500 since I swapped the names.

Source: Google Finance

When it is all said and done, it matters what the stock has done in an investor's portfolio. For me, Facebook is one of my larger positions and has been doing very well, as I'm up 18.3% on the name, while the position occupies roughly 10% of my portfolio. I own the stock for the growth portion of my portfolio, and I will continue to hold onto the stock for now.

My portfolio is up 17.7% since the inception while the S&P 500 is up 13.3%. For 2017 my portfolio is up 7.2% while the market is up 5.2%. Below is a quick glance of my portfolio and how each position is performing. Thank you for reading and I look forward to your comments!