“I think that the Facebook IPO has been a disappointment to anyone who bought in on it. A lot of people had anticipated a big spike in the stock, and it just didn’t work out that way. Part of the issue was that there was so much demand for it, and they raised the price to a very full valuation of the stock, which didn’t leave a lot of upside. When you also have the issue of the NASDAQ and not being able to get all the trades through, it ended up spooking a lot of investors. A lot of hype surrounded the trade, but despite the volume, people didn’t bid it up to the levels originally anticipated. Now we’re seeing that the stock is selling off, which is not surprising when you look at all the social media IPOs—most of them have ended up going down below the original price. Facebook will continue to grow, but the question now is can they monetize their business to justify their current valuation? They’re trading at over 100 times earnings.
Frankly, I think Apple is still a great stock. You’re looking a company that has a 23 or 24 percent margin and it’s trading at 13 or 14 times earnings—that’s a great value.
The market is still in correction mode, which is not a shock. Right now, if I were a trader, I’d be looking for an oversold bounce. Short term sentiment has gotten so negative, but realistically, people are less focused on earnings unlike earlier this year. Now, the market is being driven by the European problems and the political uncertainty here in the U.S. Unless we get a gangbusters second quarter earnings or a surprising GDP report—neither of which I foresee—I think we’re going to have a choppy summer in the market.”
(Every Tuesday morning, ProBizMS will be checking in with Pinnacle Trust’s Jeremy Nelson on what the market has done, is currently doing and Nelson’s thoughts on the coming week as well as other topics pertinent to the economy. Nelson’s comments are not meant to be construed as financial advice; the weekly posts will retain the flavor of an informal interview/conservation. Nelson currently serves as Chief Investment Officer for Pinnacle Trust located in Madison, MS. Nelson’s primary role is working with clients to create financial strategies that help them achieve their life goals. He also chairs the Pinnacle Trust Investment Committee, where he reviews and directs the firm’s investment process.)