Technology stocks have done well this year. The Technology Select
Sector SPDR (XLK) bottomed out in March and by late October was up more
than 60%. Tech has performed better than any other sector
year-to-date – up 33.7% as of Friday's close.
Part of the tech gain is related to how new media companies are
categorized. Some of the stocks that make up the sector probably don't
belong there. Companies like Google (GOOG), Ebay (EBAY), and
Mastercard (MA) are considered tech stocks. The first two inherited the
space because they are more internet-based than other companies.
However, Google is more like a giant newspaper that gets its revenue
from advertising. Like other media companies, GOOG might fit better in
the Consumer Discretionary group. Ebay is an auction house – same
thing. Mastercard is a credit car company but for some reason is not
listed as a Financial. Yet all three companies contributed to the
dramatic rise of the sector this year. Technology is more diversified
than it looks.
Another Consumer Discretionary-like stock may soon be added to
Technology sector: Facebook. Although not yet public, Facebook is
heading toward an IPO. In September
Facebook announced it was cash-flow positive, making enough money to
cover the expenses of its 300 million users. This is more than can be
said for Amazon (AMZN), which had negative cash-flow negative for years
after going public.
Facebook is a a social media company. For those not yet in the club,
Facebook allows users to build personal web pages and connect to
"friends" in the network. According to Alexa.com, Facebook is now the 2nd
most visited website on the planet – just behind Google. It's big, it's
growing, and it's almost surprising that it took so long for the
company to make money.
In September, we told
you how to buy a few other tech stocks in the media space. Today, we
offer another way to get into social media before Facebook's IPO. Last
year, Facebook started allowing employees to sell stock. This helped
open a secondary market for their pre-IPO stock. If you want to buy
Facebook stock their IPO, check out two sites that specialize in these
sorts of transactions: Sharespost & SecondMarket. This isn't a recommendation, just a tip. Buyer beware.
Disclosure compliant with FTC 16 CFR Part 255
covering writer, editor, and publisher: No positions in any of the
securities mentioned. No positions in any of the companies or ETF
sponsors mentioned. No income, revenue, or other compensation (either
directly or indirectly) received from, or on behalf of, any of the
companies or ETF sponsors mentioned.
