Biotechnology vs Internet vs Social Media … Who dares win !

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Sometimes it pays to take a step back from looking at the trees to see the forest. Indeed, most people will know of the explosion in Social Media & also the dizzy rise in the stocks of the lucky listed firms in this sector.  But few will be aware that Biotechnology sector stocks have even surpassed the explosive rally in both Social Media & Internet related stocks since beginning of 2012.

The above chart clearly illustrates what happened in the last two & a half years using IBB (Biotech ETF), FDN (Internet ETF) & SOCL (Social Media ETF).  Now, all 3 sector ETFs have suffered corrective move lower from March 2014 all time highs of around -16% for IBB, -19% for FDN & -28% for SOCL.  S&P500 (SPX) & Nasdaq100 (NDX) only suffered a -1.5% & -5% drop from March 2014 highs respectively.

Some commentators & analysts out there think that there are nuggets to be found in the Biotech carnage  http://www.forbes.com/sites/kenkam/2014/04/18/opportunities-among-the-rubble-of-the-biotech-selloff/ . However, Asianmacro think that unless you are very familiar with the precise potential new ‘wonder drug’ or ‘cure all treatment’ that is in the pipeline of some of these Biotech companies; more often than not, it is like prospectors trying to make it big in drilling for oil or finding the next new gold vein in the ground.  Who dares win!

However, Social Media might be more interesting now given the deeper correction & some of the names in the ETF & sector like Tencent, LinkedIn, Sina Corp/China & Google continue to deliver in their businesses & earnings. In fact, Asianmacro recommended a buy recently in Tencent on 6 May 2014 https://asianmacro.com/2014/05/06/where-to-on-social-media-facebook-10-cents-or-rakuten/ .

OK time to hit the ‘LIKE’ button or perhaps the ‘BUY’ button as well !

Where to on Social Media … Facebook, Tencent or Rakuten ?

Before AsIanmacro takes his sip of this evening single malt whisky, time to snap a pic & share it on social media … Now wait, so should it be on Facebook, Whatsapp, Viber, WeChat, Instagram, …. the list goes on and it is definitely a chore these days on which to use!

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I have always been a techie & have pretty much every other social media app installed across my iOS, Android & Windows devices.  But when it comes to interacting with pretty much anybody in China, it’s Wechat (owned by Tencent – 700 HK)… forget about everything else.

Viber is just so sluggish eversince the recent updates & also the purchase by Rakuten (4755 JP) probably will turn it into another drive-by blasting of spam marketing everytime you use Viber in due course.  Facebook (FB US) even with its purchase of Whatsapp is just so yesterday … good for recording your life-story everywhere else except China & that Whatsapp .. come on, does not even have VOIP calling now & other features available in so many other messaging apps. From above normalised charts of FB US, 4755 JP & 700 HK; you can see FB & 4755 skyrocketed & outperformed 700, probably due to the wider investor base due to the listing in USA & Japan chasing them exuberantly.

This brings me to a ‘gun-to-head’ showdown, where despite the lofty valuations applied to FB US,, 4755 JP & 700 HK; if I need to own just one social media company to ‘pay-to-play’ & get on the boat … it will be 700 HK! From the chart below, look at the decent 25% correction from the recent highs & it has real revenues that continue to grow with monetisation of all the services and paid extras that people foot up in China to use. It’s a no brainer .. except at what levels to jump onto the bandwagon.

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For Asianmacro, it will be between 450-462 just shy of current 492 level.  It can easily come with any ‘Sell in May & go away!” portfolio adjustments soon in markets.  Stop loss sell will be < 425 not because I want to get out per se but purely from risk-management, but decent buying levels after will be 380-400 which I will be interested in getting back on again.