I’m an avid believer in the old adage to buy when there’s blood in the streets.
Well, Twitter (TWTR) is hemorrhaging.
The stock has been in steady decline since it peaked on the day after Christmas at $73.31. And its descent was just exacerbated by the expiration of the lock-up period.
Lock-up periods prevent insiders, venture capitalists and other investors from selling shares of an IPO directly after trading begins.
Twitter’s lock-up period freed up about 470 million shares, or 82% of the company’s equity – and shareholders seized the opportunity to dump shares.
The stock is down over 20% since the lock-up period ended.
I was hoping today’s column would end with a recommendation to buy Twitter shares on the cheap.
But that’s not going to happen.
Consider that when Facebook’s (FB) lock-up period ended, 800 million shares were freed up – yet its stock spiked 13% higher. Facebook’s stock kept pushing northward from there.
Facebook’s experience isn’t an isolated incident, either. A stock’s reaction to the end of the lock-up period oftentimes offers a peek into its performance over the next six months.
Perhaps even scarier for Twitter, though, is the emergence of other social media platforms like Instagram.
Instagram is presently in hyper-growth mode, just like Twitter once was.
Social media is a slippery slope.
Every eyeball on Instagram is one less eyeball on Twitter. And once you start losing users, it’s hard to ever get them back (just ask MySpace).
On such merits, let’s pass on Twitter, despite there being blood in the streets.
We’re not about to leave you empty handed, though.
Director of Energy and Resources, Karim Rahemtulla, is currently on the ground in Turkey.
In his article today, he explains why he calls the country a “forever-emerging market.” And, better yet, he provides a way for interested investors to get on board. Click here to read his article now.
Do NOT Deposit Another Dollar in Your Bank Account Until You Read THIS
A CIA insider has launched an urgent mission to expose the government’s secret money lockdown plan…
Once you see what could happen next time you go to an ATM, you’ll understand why he’s sending a FREE copy of his new book to any American who answers right here.
Onward and Upward,
Founder, Wall Street Daily
More Storylines Impacting Markets
Falling Yen Fails to Help Japanese Exports
Contrary to the Keynesian view that a declining currency is a guaranteed path to increased exports, Japan just posted its largest-ever trade deficit – despite a decline of 20% in the value of the yen. The difference between the value of Japan’s exports and imports grew by more than two-thirds in the 12 months through March, to 13.7 trillion yen ($134 billion). This is the third consecutive year of deficits, the longest streak since records began in the 1970s. More alarmingly, the news that exports actually declined compared to the previous quarter – while imports grew by 4.5% – provides evidence of further weakening in the Japanese economy. The falling yen, coupled with rising energy costs and a slowing Chinese economy, lends credence to a global slowdown that has yet to be reflected in U.S. stock prices. Unfortunately, it’s just a matter of time before the news sinks in to investors.
From Death Cross to Golden Cross in 14 Months
In January 2013, the 50-day moving average on the iShares Barclays 20+ Year Treasury Bond Fund (TLT) fell below its 200-day moving average in a classic Death Cross movement. The Death Cross is a strong technical indicator for a decline in bond prices. And since interest rates move in the opposite direction of bond prices, this foreshadowed an extended rise in interest rates. This all changed on March 20, 2014 when the 50-day moving average crossed over the 200-day average in another classic movement, called the Golden Cross. This movement foreshadows an extended period of higher prices in longer maturity Treasuries – and a corresponding decrease in interest rates. This flies in the face of economists’ projections of a strengthening U.S. economy. The Golden Cross suggests that Treasury prices will continue to rise (yields will fall) for a number of months to come. If so, the anemic economic growth is likely to worsen – putting sustained downward pressure on U.S. stock valuations.