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Social Media & The Only One

May 20, 2013

Deal Book. The Internet is driven by content and paid for by advertising, and every large retailer has a colorful and artistic company website; and many businesses, both large and small, post their ads on Facebook, Twitter, LinkedIn, Google+, Manta, Pinterest, ZyngaAngie’s List Incorporated, Jive Software, Groupon Incorporated, Pandora Media, Demand Media, FriendFinder Networks, and HomeAway Incorporated. And then there are AOL, Yahoo! and Amazon that are the Sun and have discovered magic formulas in which others must find a place (please see our previous (B)(N)-Company posts for these companies; the Search box is helpful).

According to Adam Kmiec of the Campbell Soup Company media team, there are 1,862,421 social media experts and gurus “pandora-ing” their services and insights on his last count (InvestorPlace, April 26, 2013, What Social Media Can Teach Us About Investing). If they each make just $100,000 per year, then the gross revenue of the industry would be $1.8 trillion (in round numbers), so we suspect that 1,862,000 of them are looking for work.

And there are also \aleph_0 (an even larger number but still countable) engaging sites and services for investors – and whatever it is, there is someone out there who will say that it’s OK, and it might be – but there’s only one – The RiskWerk Company – that knows the “price of risk” and which investments are always “as good as cash” and “better than money”. Please see our recent Posts such as Risk-On/Risk-Off and The Real Intelligent Investor, both in May 2013, for a timely Introduction.

However, The RiskWerk Company is a hedge fund and a private company, and the only “risk” we take is ours; all the others have some problems (please see the Exhibits 1-5 below) and we’ll just have to wait for them to establish businesses that make money and pay dividends in ways other than by selling their IPO (Initial Purchase Offer) stocks to adventurous mutual funds and institutions that include many public pension funds, who must be fiending for money so that they can pay their dividends and premiums when due; if they take profits – and there are some for some people – anything could happen and the combined market value is currently $92 billion on gross revenues of $9.8 billion and operating profits of $600 million before depreciation expense. Make a wish?

Exhibit 1: (B)(N) FB Facebook Incorporated – Risk Price Chart

(B)(N) FB Facebook Incorporated - May 2013

(B)(N) FB Facebook Incorporated – May 2013

Facebook Incorporated is a social networking website which builds products that create utility for users, developers, and advertisers.

(Please Click on the Chart to make it larger if required.)

Exhibit 2: (B)(N) LNKD LinkedIn Corporation – Risk Price Chart

(B)(N) LNKD LinkedIn Corporation - May 2013

(B)(N) LNKD LinkedIn Corporation – May 2013

LinkedIn Corporation is a professional network on the Internet with more than 90 million members in over 200 countries and territories.

(Please Click on the Chart to make it larger if required.)

Exhibit 3: (B)(N) GRPN Groupon Incorporated – Risk Price Chart

(B)(N) GRPN Groupon Incorporated - May 2013

(B)(N) GRPN Groupon Incorporated – May 2013

Groupon Incorporated provides a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount. The company features a daily deal on the best stuff to do, see, eat, and buy.

(Please Click on the Chart to make it larger if required.)

Exhibit 4: (B)(N) ZNGA Zynga Incorporated – Risk Price Chart

(B)(N) ZNGA Zynga Incorporated - May 2013

(B)(N) ZNGA Zynga Incorporated – May 2013

Zynga Incorporated operates as a social game developer with 232 million average MAUs in 166 countries.

(Please Click on the Chart to make it larger if required.)

Exhibit 5: (B)(N) ANGI Angie’s List Incorporated – Risk Price Chart

(B)(N) ANGI Angies List Incorporated - May 2013

(B)(N) ANGI Angies List Incorporated – May 2013

Angie’s List Incorporated operates a consumer-driven solution for its members to research, hire, rate and review local professionals for critical needs, such as home, health care and automotive services.

(Please Click on the Chart to make it larger if required.)

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks.

Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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