Last Halloween, the scariest kid on the block was Facebook (FB). In just five short months of publicly traded life, the biggest social media website had slumped to just $18 a share from its $38 IPO price.
Today, the costume is entirely different. If you look beneath Facebook's hoodie you'll find a business that is growing sales and earnings and a stock that's become a market leader instead of a laggard.
"I think their plan is very much in place and the monetization of Instagram is going to more than offset some of the softness that people saw," says Simon Baker, the CEO of Baker Ave Asset Management. "There was a little bit of concern that some of the young, kiddie-winkles aren't actively on it as much, but they're not (the ones) spending the dollars."
To that point, Facebook's CFO did mention a ''decrease in teen users," but the company's results clearly show advertisers aren't budging, with ad sales growing 66% from a year ago. For Baker, that makes Facebook a "long term core holding" that will absolutely be higher a year from now.
Another core social media favorite in Baker's goodie bag is LinkedIn (LNKD), the largest professional networking and job search site. Since reporting solid results but soft guidance Tuesday, the formerly red-hot stock is down about 15% from its all-time high of $257 in mid-September.
"It's a little dangerous to buy right here," Baker says "but on a pullback it's a treat."
He likes their business model, their huge base of 225 millions users, and their money-making capabilities, the latter of which Baker knows first hand, having used LinkedIn to recruit for his own business.
"I paid LinkedIn $6,000 and got two highly qualified people...It works really, really well," Baker says, and allowed him to avoid hiring an executive search firm.
And finally, when asked to identify the creepiest house on Social Media Street, Baker says "Yelp is a scary stock." While acknowledging its incredible 250% year to date rally, Baker likens the future prospects for the urban lifestyle ranking service to something short of Freddie Kruger.
"You get a nice little run going and you're all excited and they come back and say 'we are going to sell some more (stock) in a secondary (offering) again,'" Baker groans. "As an investor you hate these serial diluters."
Add in the fact that Yelp has never turned a profit and is facing increased competition from Google (GOOG) and Baker says "I think (Yelp) has had its day in the sun."
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