Stay away from Twitter, financial advisors say

CNBC
Stay away from Twitter, financial advisors say
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CNBC

Stay away from Twitter (TWTR) stock is the message to clients from a group of select financial advisors polled by CNBC.

The 15 advisors are part of the CNBC Digital Financial Advisor Council, a 20-member group of financial executives with cumulative assets under management of about $23 billion. We asked the advisors about Twitter in a snap survey Tuesday and Wednesday.

Asked if they would recommend Twitter to clients either in its initial offering or after it begins trading, all of the advisors responded no. Eleven of the advisors said they had a low comfort level with IPOs in general, and four said they had a medium comfort level, but none had a high level.


Of the group, ten said their clients did not invest in Facebook either. Two advisors, however, had clients that invested in Facebook's IPO, and three had clients who got into it after it began trading.

"I typically don't recommend that clients be involved with IPOs at all, and primarily because we're really very focused on broadly diversified portfolios and not chasing the big hit kind of deal stocks," said Diahann Lassus, president of Lassus Wherley in NewProvidence, N.J. She is a member of the CNBC Digital Financial Advisor Council.

Whether Twitter will do well in the secondary market is a tough call. "One can hope, but I don't know," she said. "You look at Facebook and you look at typical history on IPOs and the odds are reasonable that they could do well but they could also go the other direction too because we're seeing more and more companies that would really love to target their markets and we're seeing more and more firms that are getting into the social media space."

Barry Glassman, president and CIO of Glassman Wealth Services, said he rarely gets involved with IPOs and he's not recommending clients buy into Twitter. If clients were involved with an IPO, it would be a relatively small part of their portfolio. Glassman does like Twitter as a service, but he has problems with it as a stock. For one, he sees his older clients using Facebook more, and his college aged clients are not tweeting.

"We're talking about a company that doesn't have income.They have revenues but they don't have profits at this point," said Glassman, also a council member. He also cautioned that people who use Twitter and have high hopes for its financial success, will also be faced with more advertising on the Twitter feed because that is what it needs to do to become profitable.

Twitter's IPO, set to price today, is being met with fairly widespread skepticism though underwriters Wednesday afternoon were aiming for a price of $27, above its offering range of $23 to $25. Sources said Twitter management would decide on a final price by day's end, according to CNBC's Kate Kelly.

(Read more: Much ado about Twitter in busy IPO week )

A recent AP-CNBC poll showed nearly half of active investors-those who had adjusted their holdings within the last year-say Twitter would not be a good investment.

That sentiment is stronger from higher-income respondents; some 56 percent of those with incomes of $75,000 a year have doubts about its investment prospects.

-By CNBC's Patti Domm. Follow here on Twitter @pattidomm.



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