E Despite Privacy Issues, Here's Why I Still Like Facebook

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.

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Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I ...

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Joe Economy 3 years ago Member's comment

Great article, thanks!

Facebook is a great stock to own because it is a company that is expanding at such a fast rate with virtually no other competitors doing what they do so well.

As long as FB continues to grow in exponentially in users and re-injects cash by investing in buying out smaller companies that complement its own technologies, there will be no stopping the stock.

Currently FB is forecasted to grow at a cracking 45% in the current quarter! I might be wrong but it seems it has $0 debt and total cash of almost $30 bn as of the last 2016 income statement. Perhaps what to look out for next is a stock split? Failing any major privacy or moral mishaps, the stock should continue to grow.

If you have a teenage kid, chances are he or she is spending a majority of their time on FB when using a smartphone. For better or worse.