I really LIKE my Facebook shares now

Happy Friday.

At last, I’ve got something other than Buru Energy to cheer about. More about that below, and my soaring Facebook (Nasdaq: FB) shares…

I like a winner just as much as anyone. And although my portfolio has been chugging along nicely — not too hot, but not too cold — I’ve felt like a loser these past few weeks.
It all stems back to 1981, Ian Botham and the cricketing disaster at Headingley. I won’t bore you with the details, but England won a cricket match when everyone, including the bookies, had totally written them off.


Fast forward a few years, and a younger me, fresh off the boat, journeyed to Headingley in 1989 to watch Australia’s supposedly “worst ever team to leave our shores” take on the all conquering Poms.

Australia won that first test, and the series 4-0. It was the start of a 16-year Ashes winning streak for the Aussies, rudely broken in 2005, the last series I saw in England before returning to back home to Australia — just in time to see the Ashes regained by a rampant Australia in the 2006-7 series whitewash.

Massive wins are my idea of “good for the game”

During those 16 years of Ashes dominance, my wife was perplexed as to why I enjoyed such often one-sided wins for the Aussies. She figured closer matches and indeed an England win would be “good for the game.”

To say my wife is not a “cricket tragic” would be a massive understatement. “Headingley 1981” draws blank looks, as do the 1985 and 1986-7 Ashes series, both also disasters for Australian cricket.
I told her, one day, the boot would be on the other foot.

That England would again win the Ashes. But in the meantime, I was determined to enjoy every moment of Australia’s domination, and in the process, gain retribution for those disastrous series of the early 1980s, and especially the dastardly Ian Botham, the elegant but devastating David Gower, and the boringly effective Chris Broad.

Australian cricket is now in disarray. Our million dollar batsmen can’t master the seemingly ancient art of occupying the crease. Our bowlers are breaking down. The umpires, including their technology, are not helping our team’s fortunes. And all this is before Alastair Cook really starts troubling the scorers.

What’s all this got to do with investing?

  • The performance of the Aussie cricket team has made me feel like a loser — not helped by the late night SMS messages from my Pommy mates, celebrating their country’s success as much I did my country’s wins in that 16-year Ashes winning streak.
  • Never take your winners for granted. Celebrate them, of course, but know the worm can and will turn, and that losers are part and parcel of the investing game.
  • Complacency will bite you on the bum, one day, likely when you least expect it. As they say in cricket, form is temporary, class is permanent. The worst investors can have lucky streaks. The best investors can have bad streaks. Over time, the latter group recovers, and ultimatley wins.

Regular Take Stock readers will know I often mention my most recent investing mistake — buying shares in rare earths producer Lynas (ASX: LYC). To date, I’m down over 50% on that relatively small bet. I might be waiting some considerable period of time before I get even close to recouping some of my money.

Setting fire to money is not my idea of fun

Losing hurts.

It hurts me a lot. See Headingley 1981, above. MCG 2010. And now Lords 2013.
As many psychology studies have shown, humans feel the pain of loss far more than we enjoy a similar gain.

Burning money

Because losing hurts, I play to win.

Cricket. Tennis. Footy. These days, coaching my son’s U8 soccer team gives me great pleasure, especially so when we win — as we WILL again Saturday morning.

Investing is about winning too.

Stating the obvious, it’s a game I play to win, and it IS a game that is eminently winnable. Not every season, but over time. Over an extended time period, the odds are so stacked in your favour that it would be virtually impossible to lose.

The agony of defeat

But many do lose.
— They invest in risky, loss-making, penny share mine exploration companies, hoping to hit it big. ‘Hope’ never consistently wins anything.
— They sell when markets wobble, going to the “safety of cash” at precisely the wrong time.
— They buy into bubbles — like the recent gold bubble, or the mining services bubble — instead of avoiding them like the plague.

No-one ever lost money NOT buying something. For example, at Motley Fool Share Advisor, Scott Phillips has consistently warned against buying miners, mining services companies and gold, advice that has served our subscribers very well indeed thank you very much.
— They plan for the long-term but react to the short-term.
— They bear the scars of years past even after good times have returned.
I could go on. Hopefully you get the picture. Investing is a game where we can all WIN. See above — form is temporary, class is permanent.

To counter my ongoing Lynas disaster-story, I’ll leave you to reflect on my one BIG WIN overnight.

Facebook. Like. Win

I have a long (bull) options position in Facebook (Nasdaq: FB). Specifically, I own $20 strike call options expiring in January 2014.
Without going into the details of my position, all you need to know is I’m effectively long the underlying stock.
So you can imagine how I, and my portfolio, celebrated Facebook’s huge win in overnight trading, the shares soaring a MASSIVE 30% after blow-out earnings.

In September last year, around the time I was opening my Facebook position, a Barron’s columnist argued the shares were still too pricey, saying the true value of the shares were $15, way below the IPO price of $38.

In the wake of the bearish forecast, Facebook’s share price fell from $23 to $21.

Facebook IPO

Just 10 months later, Facebook shares now swap hands for over $34. Post-results, even the usually cautious Financial Times was signing the company’s praises, saying

“Facebook has done exactly what everybody wanted it to do, and precisely what nobody believed that it could: create a mobile advertising business with serious revenue growth… who knows, Facebook may soon reach its $38 initial public offering price.”

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More reading

Of the companies mentioned above, Bruce Jackson has an interest in Lynas and Facebook.

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