Facebook Inc: Buy FB Stock on Dips Until You Run Out of Money

Advertisement

fb - Facebook Inc: Buy FB Stock on Dips Until You Run Out of Money

Source: Scott Beale / Laughing Squid>

There’s nothing like some indiscriminate selling to make quality stocks bigger bargains, and Facebook Inc’s (FB) 5% drop in two days is exactly the kind of sale in FB stock that investors should take advantage of whenever they occur.

fbmsn

Facebook shares are already looking frisky Tuesday, so the market clearly is waking up to that fact. But don’t worry if you missed out on buying FB stock on the cheap today — this Brexit ordeal is going to drag on, and the markets are going to do more stupid things in the days and months ahead.

Global financial shocks like Brexit lay waste to stocks across the board. Investors stampede out of riskier assets and into supposed safe havens like Treasury debt and gold without stopping to ask why. It’s selling solely for the purpose of front-running the other guys who are selling, with stop-loss orders getting tripped all the way down.

This is not the orderly repricing of risk that leads to wise investment decisions, and it creates situations in which the largest, most liquid stocks take really head-scratching hits.

Good news if you’re hungry for more FB stock.

True, the great majority of Facebook’s global user base resides outside the U.S., operating in currencies outside the strengthening dollar. The Brexit crisis looks like it’s going to drag on for months if not years, lending support to the greenback all the time.

But … how does this change the investment thesis on FB stock, again? The dollar has been ascendant for years. Every U.S. multinational stock price should already reflect the impact of a strong and potentially stronger dollar.

The FB Stock Selloff Was Insanely Overdone

Facebook stock lost roughly $14 billion in market value in two sessions. Is the market saying that the Brexit is going to wipe out the equivalent of Facebook’s last three years of operating income because unfavorable forex might shave some percentage points off top-line growth? If it is, check the market’s pockets for crazy pills.

Very few stocks are recession-proof. Counter-cyclicals just aren’t all that common, and FB stock is no exception. Anything that hurts incomes and ad spend is going to be felt by Facebook, plain and simple.

But the market has really gotten ahead of itself here. This is not a Lehman moment. Any movement on the Brexit has been punted back to October, and a lot can happen between now and then. With every passing day, it seems more and more likely that the Brexit can be scuttled.

Selloffs like we’ve seen on the Brexit are a gift to the smart money. Anytime you get more of a good stock at lower prices, you take it.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/06/fb-stock-dips-facebook-inc/.

©2024 InvestorPlace Media, LLC