Mark Zuckerberg, the CEO of Facebook, just spent $19 billion to buy a company called WhatsApp. That’s seriously amazing. He’ll be 30 on May 14. Can you name one person under 30 who spent that much on anything? You probably had never heard of WhatsApp before last week. I hadn’t. There is one overarching investment lesson here for all us investors: It’s not the concept, it’s not the software, it’s not its uniqueness. (WhatsApp is not unique.) It’s not even the management that creates the enormous price that Zuckerberg paid for WhatsApp. It’s its success. It’s its huge, fast acceptance by users, the great unwashed. Their acceptance is what gives WhatsApp’s value.
|Mark Zuckerberg just spent $19 billion for a tech company not because of its earnings and profitability, but because of its acceptance among consumers.|
This is why these Internet success babies are not valued on traditional metrics of earnings and profitability. They’re valued because of their unassailable acceptance and position (at least for now). And that’s why companies like Google, Amazon, Priceline, Baidu, LinkedIn, OpenTable, Netflix, Yelp, Twitter, Facebook, TripAdvisor, YY and Pandora are valued so highly and will be valued even more highly as they grow and cement their position among consumers — assuming they don’t screw up along the way, and assuming they maintain their consumer appeal and are not eclipsed by new, better services. This leads me to Jon Markman, the investor. Markman started investing seriously in the mid-1980s, captivated by fast- growing new companies like Microsoft, Oracle and PeopleSoft, and in the 1990s a then unknown computer networking company called Cisco Systems. Why not get in early on all the promising Internet companies? Don’t even think about whether they make sense to you, or whether you’ll use their services or whether you think they’ll succeed, or whether they’ll have some bumps in their early days (think Facebook). Get in on all. Ride the good ones up. Kick out the bad ones. As your winners succeed, take a little money off the table. Try to play this game with the bank’s money. I’m an idiot because I didn’t buy the companies that Markman was buying years ago.
Meet Money and Markets’ new technology stock specialist, JON MARKMAN!
Jon began his career as editor, investment columnist and investigative reporter at the Los Angeles Times. As news editor, his staffs won Pulitzer Prizes for spot-news reporting in 1992 and 1994. In 1997, Microsoft recruited Jon to help launch MSN’s finance channel, where he served as Managing Editor. In that capacity, Markman became the co-inventor on two Microsoft patents. From 2002 to 2005, Jon served as portfolio manager and senior investment strategist at a multi-strategy hedge fund. Since 2005, Mr. Markman has specialized in helping everyday investors buy tomorrow’s technology superstars BEFORE they skyrocket. Mr. Markman is the author of five best-selling books, including Reminiscences of a Stock Operator: Annotated Edition; New Day Trader’s Advantage, Swing Trading and Online Investing.
I was running a mutual fund for Sir JohnTempleton buying the same stocks that Warren Buffett was buying and proxies for Buffett’s private held companies like Mohawk Carpets. I missed out on some of the early explosive growth in Internet companies because I just didn’t use their services, and I was buying stocks like American Express and Coca-Cola. It’s time to listen more to people like Jon Markman, and to try to identify new Internet trends, for example, the trend to privacy-based Web services such as Ravetree, HushMail and DuckDuckGo. You should definitely try out some of these sites if you haven’t already. They’re really good, and you don’t have to worry as much about your personal information being data-mined and hacked. That’s a huge benefit to a lot of people– less so to me personally, since I don’t care if the NSA knows I’ve been shopping for slippers at L.L.Bean. These three are not public companies but there soon will be others in their space. Do you see a pattern here? Jon Markman sure does. In fact he has turned it into a winning formula for uncovering new, fast-growing companies with unlimited upside potential, and he is building a fantastic track record to prove it. Markman sees a whole new tech-stock boom already under way, but the best is still ahead, and I agree. And this time around it will dwarf the massive gains of the 1990s and 2000s. That’s why I’d like to welcome Jon Markman to our Money and Markets family of editors. You can read his investment insights and journey along as he hunts for the new tenbaggers of the mobile Internet age. Regards, Douglas Davenport
P.S. Whether you own tech stocks or are just now contemplating getting your feet wet, we have expert help for you on the Money and Markets blog. Our new technology stock specialist — Jon Markman — is standing by to answer your questions! Here’s your chance to ask one of the world’s greatest tech stock experts anything you like about technology stocks: Simply click this link to jump over to the Money and Markets blog. Jon will check in during the day to answer your questions.