Snap Inc. (SNAP)

This company has a major problem. Facebook (FB-Q) copied Snaps best attributes, which has stunted their ability to grow its social network. The power of these enterprises is the network effect that they create through users. All Facebook had to do was introduce a similar type of feature with an already very large installed base. The company is challenged, because there are a lot of expectations and it was sold at a very lofty valuation. There is a lot of stock that still has to come out. Traditional TV stations are struggling with how they distribute short clip videos and appeal to a demographic. Buying this in the low single digit numbers might be attractive.

Social media is a core theme in this market. There are some companies that are doing a great job in monetizing the viewership they have. He doesn’t like buying the weakest company within a group. This has traded back to its IPO price. If it is able to hold here, build a little bit of a base and get turned around, he would take a look at it. A great way to participate in the social media is to buy Global’s ETF SOCL, the basket of social media companies. However, if he were going to buy just one name, it would probably be Facebook (FB-Q).

When it IPO’d, there was a pretty spectacular plunge, but has now come back. If you like the theme on this, he thinks you can get more through Facebook (FB-Q), which is going to outspend and out-technology this company in a hurry. There’s just too much risk in this company. On a valuation of “Price to sales” it has a very elevated PE.

Competing with Facebook (FB-Q), which has much deeper pockets. Also, it is more expensive than Facebook.

He wouldn’t go into this. It is way too early. Facebook (FB-Q) is doing everything it can to destroy this company. What Snap is doing is not patentable, and Facebook is building out a very, very powerful model, and have 1.8 billion users. If they just slow growth of Snap, it will destroy Snap.

FB-Q via Instagram is a tete a tete competitor. SNAP-N has 70% penetration in the under 25 market. There is a lot of euphoria around a lot of hype. It has to do with whether they can monetize their platform. It is trading at 25 times sales.