Stock Acquired! Facebook (FB:NASDAQ)

I bought some FB shares a couple of days ago!

So here is why I bought some FB shares @ $149.80.

Strengths

Reach: Saying many people knows about FB is probably an understatement. According to FB, there are reportedly 2.27 billion monthly active users on Facebook as of September 30, 2018. Based on a world population of 7.53 billion people, it means about 30% of the world population uses Facebook. There are not that many companies that can claim to have 30% of the world population as users, many of them on a daily basis. Imagine the amount of data which FB is collecting from these 2.27 billion users on a daily basis! And what FB essentially sells is our data; to advertisers. So while it is free to use, we are essentially paying with our personal data, our likes, our comments and everything we do on FB. 

Diversification: I am not too sure about you, but I have heard a couple of times on the street or from friends and relatives, FB is passé already, now i am on Instagram! But did you know besides Facebook, FB also owns Whatapps (WA) and Instagram (IG), if you are not on FB, you are likely on Instagram and most likely you already use whatapps! So just how big are WA and IG? 

WA: In Jan this year, a Techcrunch article shared that there are 1.5 billion WA users who send 60 billion messages daily. 

IG: According to Techcrunch, as of June this year, IG has about 1 billion users. While FB do not report IG revenues separately, I am inclined to think it should be quite a sizable amount, considering the user base. While I have heard some people leaving FB for IG, no worries there if you are vested in FB! Besides, actually i do not think people really delete their FB account per se, it is just they use it less as compared to using IG. Going forward, IG will be launching IGTV, which essentially is IG version of Youtube. 

Source

So if you added up the numbers, FB group has about 4.8 billion users. No doubt, many of these are double / triple counting as many users use all three apps. But the scale of it just amazes me personally at least. 

Stickiness: I have to say the FB / IG / WA, are extremely sticky. You just need to travel on the public transport in Singapore to see that. With everyone glued to their phones during their morning / evening commute, you can see that at least 70% of people are on FB app. Even in office, you can see the prominent blue bar of FB on many laptop screens! It seems like when people are bored, people will just turn to FB to fill up these gaps. Some might turn to reading the news or a book, but it seems to me that MANY turn to FB / IG / WA for their daily source of entertainment, news, videos, and communication. Though what I see is only in Singapore, I believe it is pretty similar in many developed countries in Singapore. 

In short, FB / IG / WA is very pervasive and very sticky, in Singapore at least, as well as many other countries, which is good for a company.

Weakness

Concentration risk: While FB, WA and IG provide diversification, they are all social media platform related after all. If something drastic happens to the online social media platform, FB would no doubt be affected. Though at this point in time, I am unable to think of something like that could happen in the foreseeable future. 

One-off businesses: Advertisers are not sticky, they will bring their money to whichever medium is most effective. So there is no incentive for them to stay with FB related products if they find FB do not translate eyeballs to dollars. Advertising on FB is also relatively cheap compared to traditional kind of advertising so FB will need to continue to keep their customers base wide. 

Competing needs / wants of users and advertisers: Having advertisements on their platform are the main form of revenue generation for FB / IG, but at the same time, users can get pissed off if there are too many such ads. You might have already experienced it (I have) where the ads just auto play in the middle of the video you are watching and you have no way of skipping it. Many a times, i simply scroll down to the next video once the ad starts, not watching the rest of the video thereafter. [Important point here i scroll down and do not switch off the app altogether, so i am still in the FB app, dammit FB is sticky!]

Reputation as a social media behemoth: The fact FB is the number one social media platform in itself could be seen as a weakness when it become a magnet for almost all social media related problems / criticisms e.g. privacy leak, Mark traveling to Washington to answer questions on FB data mishandling, US election / Russia influence probe. All of which, could distract FB from their main business. 


Opportunities

Further business diversification: With the money and customer based, FB is able to diversify outside its core social media and online advertising business e.g. payments perhaps within it's Messenger / WA, similar to Wechat in China where this one app can do so much more than just sending message.

Any other areas they wish to venture into: Ok, i am a little hard pressed to think of other areas, but with the money and user numbers, FB does have a very good starting point to launch / venture into new areas complementary to FB.

Threats

Substitutes: FB is not the first social networking site created and it will not be the last. There was Myspace and Friendster before FB but FB have emerged top (at least for now), but going forward, no one knows which other new platform might pop up. But do not rule out FB buying them outright, like in the case of IG. Though anti-competition regulations might stop this from happening in future.

Privacy and new regulations: Cambridge Analytica Scandal, new regulations being introduced on data privacy, e.g. The EU General Data Protection Regulation (GDPR). The GDPR can implement fines of up to 4% of a company’s annual revenue for data violation!

Cybersecurity: Holding so much data will make FB a prime target for cyber security attacks. If there was ever a successful attack, confidence in FB would drop tremendously and it reputation will definitely be affected adversely. [that said, this is also the same for all social media companies.]

Market saturation: Getting more users = more data to sell to advertisers. But market saturation will kick in (or already has) so FB will need to find new ways to increase membership e.g. digital inclusion initiatives that would bring the unconnected online. [likewise for all other social media companies to be as well]

Numbers, numbers, numbers (from Reuters)

FB:NASDAQ

GOOG:NASDAQ [quite attractive numbers as well, but net profit margin is lower and management effectiveness not as high as FB]

SNAP:NYSE [not quite a worthy comparison to FB, not yet anyway]

TWTR:NYSE [President Trump fave means of comms. I was quite surprised at Twitter's number actually cos they are quite attractive in itself per se. But maybe i am not a twitter user/ fan, i just feel 240 characters are no match for FB's suite of offerings.]

And so that is why I have invested in FB. 😉

Phew, doing up such a post took much longer than I thought it will need. But I am happy to have finally done up my first investment journal. 

I hope you find the above analysis useful and do let me know if you have any alternative views. Happy to discuss! 

Bye for now!
Frugal Singa

Today, i shall start my journalling!

Today, i shall attempt to start something which I had held off doing for some time, though i know that it is good for me. 

I will do up my first investment journal entry on a recent stock i bought (just 2 days ago actually.)

Many a times, when I buy a stock, like everyone else, I would expect it to rise for a number of reasons. However, sometime down the road, when the stock price is moving sideways or even downwards, I will start to doubt myself and wonder if this was the right stock to buy in the first place, what if I had bought Y stock instead of X stock, i would have made money, should i sell now etc. But hindsight is always 20/20. 

By keeping a journal, I hope it will allow me to be more committed to my positions and allow me to learn from my mistakes and hopefully able to replicate my wins! Writing the thought process behind buying a particular stock will allow me to understand and more importantly remember the reasons / motivations behind my decisions further down the road as well. And hopefully, I will emerge a better informed investor, by knowing more about my very own investment decisions. 

Before going any further, I just wish to share I am more of a (lazy) fundamental investor. As much as I wish to learn more about Technical Analysis and all their modelling, I have not found the time to do so and it just seemed pretty overwhelming to me, so I will probably never ever learn it. Therefore, my stock analysis might seem pretty primitive to some. But to me simple is good and well... simple enough for me. 😁 Lastly, I am also a long term (>5 years) investors, simply because no one can predict the market in the short term, but in the long run, the trend is usually upward, so the longer the term, the better your odds of making profits. 

And also because of this, it is also unlikely I will buy an obscure undervalued stock and watch it magically reach for the moon (not within a short time frame anyway). No doubt there are plenty of such multi-baggers in small / micro / med cap stocks, but I feel they are simply too high risk for me and I prefer to avoid them.  

Disclaimer: While I enjoy picking stocks, I try as much as possible to avoid buying individual stocks as I am a believer in passive broad market tracking ETFs, so while I pick stocks, they do not form a majority of my portfolio. But sometimes, I gotta admit picking stock is just more exciting than ETFs. 💥

So my considerations when picking a stock actually just comprises a simple SWOT analysis and also a look at their profit margins, P/E, P/B, ROE as compared to their peers to decide if they are fairly priced at the point in time.

Given I am only starting my first stock journal entry, there might be further refinements to the above considerations. But without further ado, lets go to my next entry!

Feeling excited for my next post!

Frugal Singa

Raising a child in Singapore can be expensive, how about delivering a child into this world?

Singapore is an expensive place to live in. We has been dubbed the world's most expensive city to live in for the fifth year running. We are even ahead of New York, London and Los Angeles in the Economist Intelligence Unit's(EIU) Worldwide Cost of Living 2018 survey. Which really surprises me and possibly you, if you have ever stayed in New York for a while, either as a tourist or for work. 

No doubt, Singapore can be an expensive place to live in, just check out the cost of owning a car! But… as a citizen, I actually do not really think we are that expensive a place, at least for locals, to live in. There are certain assumptions in the survey that makes us the most expensive place for the 5^th year running which I will share more about in another post. 

Meanwhile, I like to share a little about the delivery related cost in Singapore, based on our own experience.

Before going into the cost per se, I just like to share while having a little one does indeed incur cost, the joy you get from raising your little one will far outweigh this monetary cost by a mile, or more. There is nothing that can replace the joy you get from seeing your little one grow and become more responsive to your actions and words. No words can describe the joy… So I shall not waste more words trying to… 😀

Our delivery was generally uneventful, which was a great thing! Mama’s water bag started to leak in the middle of the night (2 nights before EDD) and we took a Grab down to NUH. We entered the delivery suite at around 4am and by 430pm, Little Singa (LS) arrived into the world! 

For the delivery related cost, I guess we have little control over what we will / need to consume. We heard of a couple of our friends who tried natural birth and then had to do an emergency cesarean when things were not going right, hence incurring higher cost. All we could do was pray to have a smooth delivery. In the 3-4 months prior to EDD, we did increase our frequency of long walks on weekends morning, hoping it will help provide a smooth delivery. Thankfully, things went as per planned and Little Singa (LS) was delivered naturally, with epidurial.

I know there are some who regard natural delivery without epidurial as a badge of honor. Some say the pain is the rites of passage for a mother, which I personally think is hogwash. We are not some tribal people who need to prove that we are man / mother so we undergo some genital mutilation / tattoo nonsense or deliver without epidurial. If you did not use epidurial and delivered naturally, good for you, you have high pain tolerance. But on the flip side, there is absolutely Zero shame to use epidurial during a delivery.

All mothers out there are amazing, no matter delivering with or without epidurial. Our gynae gave us a piece of sound advice: use epi if you need it, do not use if you feel there is no need. There is no badge of honor for you not using when you need it. The only one to suffer is yourself. While I admit to be pretty frugal (to stingy) sometimes, this was one occasion where I was more than happy to spend the money. I personally find tooth extraction a pretty scary thing already and I feel giving birth is probably 10x scarier! So yea, whatever that can help reduce the pain during this experience, so be it.

I feel it is also important for Papa to be there in the delivery suite to support Mama both physically (though not much the hubby can do physically) and mentally (more so in this area). That, and also to witness the arrival of your little one!

The moment when LS was delivered was simply surreal. Words cannot describe how I felt and I could honestly say there were tears of joy at the point in time. Despite LS being still slimy and all, there was nothing you could love more in the entire universal (sorry mama 😆).

We did all the tests which the hospital required LS to do but there was the Newborn Metabolic Screening Programme which was optional, but we did anyway. I was hesitant to do this Metabolic Screening as it was very rare for the test to be positive (which is a good thing) and which means it will be a waste of money (cost approx. $150 if I did not recall wrongly.) Some parents might say this is small money for a test, but after hearing from all my friends who did the test for their newborn and 100% turned out negative, I was pretty sure the test would return negative (which it did) as well. The test essentially screens for rare but potentially serious disorders such as phenylketonuria (PKU), cystic fibrosis, and congenital hypothyroidism.

To be honest, the NUH bills were itemized but it was quite complicated and there were like interim bills and final bills a couple of week later, so I am actually not too sure of the final exact amount. I will usually look bills carefully and flag out any possible mistakes, but in this case, i think in the feel good moment of it all, we were just happy to pay the bills and bring Little Singa home with us! Besides, I like to think NUH will not overcharge us on purpose. 

All in, we paid about $2000 (cash) + $4000 (Medisave) for the 2 nights stay (One bedder) in NUH for natural birth. Notwithstanding, I note there are friends of ours who spend about $10,000 out of pocket when they deliver natural + e-cesarean. So the amount spent would definitely vary, depending on the procedures and level of complexity. But for a relatively straight forward case of natural birth for private ward class, I think an out of pocket cost of $2000 and $4000 from Medisave is still reasonable, given the quality of the medical care in Singapore.

What are your thoughts? 

Signing off for now!
Frugal Singa