Time to Short Facebook?

[flyonwall]

I just heard that Mark Zuckerberg sold 41.4 million shares of Facebook for $2.3 billion. Isn't large sales by insiders usually an indication that a stock's price is overvalued? Would it make sense to short Facebook?

[bjl584]

Short interest is a good way to gauge where a stock may be headed in the coming months, but it's not always the case.

[kv968]

I just heard that Mark Zuckerberg sold 41.4 million shares of Facebook for $2.3 billion. Isn't large sales by insiders usually an indication that a stock's price is overvalued? Would it make sense to short Facebook?

Insider selling shouldn't really be taken as a reliable sign that the stock is overvalued. Insiders sell for many reasons and not just the current value of the stock.

Some may sell since that's a majority of their compensation and how they get paid. Some may sell because they want to diversify and own too much of the company's stock. In the case of Zuckerberg, its believed that he sold most, if not all, of what he did to help pay some upcoming income taxes.

I'd say a better insider metric to pay attention to is seeing if insiders are BUYING the stock. Not being awarded the stock as compensation but actually using their own money to purchase stock. And even that isn't a perfect signal to buy, but at least it shows that insiders believe the stock is undervalued.

[rennigade]

Just buy high and sell low. Thats what I was good at when I used to buy individual stocks years ago.

[KTP]

Shorting facebook, twitter, amazon, insertcompanythatmakesnoprofit, is very risky as they will continue until the institutions that hold them decide to let them fall.

[disneysteve]

Would it make sense to short Facebook?

You've said elsewhere that you are young and just learning about stocks and yet you are asking about shorting things.

This is not how you learn. This is how you lose your shirt.

Stop looking for "insider" information.
Stop trying to find "trends" that nobody else sees.
Stop trying to time the market.

Just invest in a diverse portfolio and keep investing every month forever.

If you want to speculate, don't do it with 20% of your portfolio. Do it with no more than 5% so that when you do lose money, which you will, it won't have that big of an impact.

[flyonwall]

You've said elsewhere that you are young and just learning about stocks and yet you are asking about shorting things.

This is not how you learn. This is how you lose your shirt.

Stop looking for "insider" information.
Stop trying to find "trends" that nobody else sees.
Stop trying to time the market.

Just invest in a diverse portfolio and keep investing every month forever.

If you want to speculate, don't do it with 20% of your portfolio. Do it with no more than 5% so that when you do lose money, which you will, it won't have that big of an impact.

As I stated else where, this is my "play money" -- it is only 20% of the money I am investing long term. I consider it entertainment money and if I lose it, it won't hurt my retirement savings.

[disneysteve]

this is my "play money" -- it is only 20% of the money I am investing

I understand that. What I'm saying is that speculating with 20% of your money is too much in my opinion. I would suggest using no more than 5% for play money.

I have a play money account myself. It has about $6,000 in it. My entire portfolio has over $700,000 in it so what happens with the play money isn't enough to move the needle. There's no way I would put over $140,000 (20%) at risk with the speculative stuff.

[dczech09]

flyonwall,

Most people on the Saving Advice Forum are INVESTORS, not SPECULATORS. This, the global warming post, and other posts that you have made are questions about speculating.

You absolutely have the freedom to ask whatever you want, but please consider the source. You are asking INVESTORS about SPECULATING. That is like asking chefs how to farm. It does not make sense, does it?

Like DS said before, stop looking for insider information, trends, or market timing tips. That is how you lose your shirt.

You say that this is all play money and you are only using 20%? NEW FLASH: 20% is NOT play money; that is quite substantial. You may think that you would be okay losing it, but why would you want to?

Also, in other posts, you said that you are young and starting out. However, you are talking about using 20% as it won't hurt your retirement savings, that you are investing long term, and that this is play money. Clearly, you are not a beginner; you are set in your ways and are just looking for your next "tip" or "lead."