A Stock for 2016

This afternoon, the Fed is holding the most anticipated press conference in years. Not only will Fed Chief Janet Yellen tell us if U.S. interest rates have been hiked, but she’s also expected to give some specifics about future rate hikes.

As in, how many will there be in 2016? How high does she think rates will go in the next year or two? Why is the Fed raising now? What criteria will the Fed rely on to make further rate hikes?

There are a lot of questions, because rates have been sitting on zero for six years. So, you know, it’s a change…

Markets don’t like change. They don’t like uncertainty. Funding is important for any company, and you need to be able to calculate costs with relative certainty. When rates move higher, you lose that certainty. Especially now, when rates are zero…

If interest rates go back to 3.75% like they were in 2005, it matters.

The stock market doesn’t like uncertainty and change. It loves cheap money. So rising rates is threatening.

But here’s the thing: I don’t know what Yellen’s gonna do. The consensus is that she will raise rates a quarter point and say that she’s not looking to get rates significantly higher, like say 3% to 4%. However, she’s also shown that she will hold off with hikes when the market looks dicey. And yesterday’s relief rally notwithstanding, the market’s been a bit dicey lately…

And besides all that, what’s really important is how the market will react after she does or doesn’t do whatever she’s going to do (or not). Not knowing the outcome makes it kind of hard to write about the outcome, so I’m gonna write about something else today…

I’m going to write about… Twitter?

Yeah that’s right, Twitter!!

If you don’t know, Twitter is a social media website. It is intended to let you share information (like news articles, insights, jokes, etc). When you post something to Twitter, it’s called a tweet (dumb word, I know). You’re allowed 140 characters per tweet, so you have to get to the point.  

Like Facebook, you can sign up for free. Also like Facebook, you can seek out people you want to connect with or hear from. But unlike Facebook, they don’t get to accept or deny your request. If you want to follow the actor Tom Hanks or Willie Nelson, you follow them. And you can send them direct messages, questions, pictures of your dog, whatever.   

I was very skeptical about Twitter when I first used it. It seemed like a way to “follow” celebrities if you wanted to, but I didn’t think I would find much truly useful information on Twitter. Boy, was I wrong…

I started my Twitter account about a year ago. If you’re a golf fan, I don’t know if you’re going to find a good community of golfers that share tips, strategies, and insight. But the finance/investment community on Twitter is absolutely top-notch.

For instance, I follow Mad Money’s Jim Cramer. He “tweets” a lot, and it’s mostly very useful information. He’ll comment on a stock that’s moving or one that isn’t. He’ll talk about the day’s action or how the market’s behaving.

And there are many, many other seasoned veteran investors doing the same thing. I’m one of them…

I tweet a lot during the trading day. I comment about how the market looks. I’ll tell you if I see an interesting stock moving, I offer commentary on news and events, and I share insights and commentary from other investors and traders when I think it’s useful. Ask me questions, and I will answer.

So if you’re at all interested in investing, trading, stocks, the economy, or the stock market, I highly recommend that you start a Twitter account and see how much valuable information is out there. It might be a little confusing or overwhelming at first (it was for me), but stick with it for a week.

You can start by following me (@BritonRyle), and I guarantee you will find many other sources of very valuable information and insight within a couple of days.

Stock is a BUY: Twitter (NYSE: TWTR)

I was a Twitter skeptic. Now I find Twitter to be an indispensable tool and a really great community of investors.

I’d like to add that my experience with Twitter has changed my views about Twitter stock, too. I didn’t think it had much of a future in terms of making money. Not anymore. Like I said, I find the service to be indispensable.

Twitter went public two years ago around $40 a share. It quickly ran into the $60s but has since fallen to around $25. 

Twitter’s problem is what’s called MAU growth. MAU stands for “monthly active user.” Twitter has about 300 million MAUs (compared to 1.5 billion for Facebook). But the number doesn’t grow much. Analysts think that’s a huge problem for Twitter. I say it’s a problem, but maybe not a huge one…

For one thing, Twitter has grown revenue by 70% over the last year to $2 billion. Earnings per share improved around 60%. 

Of course, Twitter is valued a little over $16 billion. That’s a price-to-sales ratio of 8. Kind of expensive, except Facebook has a P/S ratio twice as high. That’s because investors realize that these stocks are just getting started. Investors also clearly think Facebook has a brighter future than Twitter. I’m not so sure…

Twitter is not the same thing as Facebook. Facebook is like a storage facility, where you keep pictures and stay in touch with people you know, like friends and family. Twitter is about making new connections. It’s about getting news from the source and learning from people you don’t know.

Investors have been disappointed with Twitter’s lack of MAU growth. The CEO got fired a few months back. But I think Twitter is about to roll out some huge upgrades that will make the service more useful for people. I think Twitter shares could double in 2016. And if you can get them under $25, it’s a good idea.

Until next time,

Until next time,

Briton Ryle

@BritonRyle on Twitter

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.