This week, the Alpha Algorithm selected social media giant Facebook, Inc. (FB), which emerged this past week as the single largest holding across all the Alpha Algorithm strategies I track.
Founded in 2004 and headquartered in Menlo Park, California, Facebook, Inc. operates the world’s largest social networking site, with over 1 billion daily active users. Its solutions include Instagram, Messenger, WhatsApp Messenger and Oculus virtual reality technology. Facebook shares soared recently after the social media behemoth reported earnings of $0.77 per share, $0.15 ahead of the Street’s consensus, on revenue of $5.38 billion, which was up by 52% year over year and also beat estimates by $120 million.
Facebook vs. the S&P 500 YTD
Seven Top Investment Strategies Betting on Facebook, Inc. (FB)
- Hedge Fund Alpha
Based on publicly available disclosures, successful hedge fund managers are investing in the stock.
- Large-Cap Growth
The stock is among the top 50 large-capitalization U.S. growth stocks generated through a rigorous 10-factor fundamental screening process.
- Value Line Model
The stock is among the top 100 stocks, from a universe of 1,700 stocks, to which Value Line gives a #1 ranking in its Timeliness Ranking System.
- IPO Index
Strategy tracks a market-cap-weighted index of the 100 largest U.S. initial public offerings (IPOs) over the first 1,000 trading days of each stock. Stocks must pass additional quantitative screens as well.
- Momentum Factor
The stock also is one of the top 120 large- and mid-cap U.S. stocks exhibiting relatively higher price momentum, as measured by a specific factor which has historically driven a significant part of companies’ risk and return.
- Small-Cap/Value Tilt
Selected using a multi-factor modeling approach, the stock is one of smaller-cap and value stocks designed to enhance portfolio risk/return characteristics.
- Large-Cap Alpha
The stock is selected as part of a strategy that aims to outperform the S&P 500 by classifying securities as either growth, value or both, discarding the lowest-scoring 25% and weighting the strategy toward the top-ranked stocks.
Recommendation
Buy Facebook, Inc. (FB) at market today. Place your initial stop at $104.
Options
With the stock technically overbought on the short term, I am holding off on recommending options this week.
Portfolio Update
Although Apple (AAPL) flirted with its stop price of $91.00, it has steadied above that level over the past week. It is technically oversold, and due for a rebound. Nevertheless, keep your eye on this position.
McDonald’s (MCD) crossed $130 for the first time yesterday as it hit an all-time intraday high of $130.38.
Sincerely,
Nicholas A. Vardy
