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How to trade Google (GOOGL) & Facebook (FB) from now through June


Article authored by Sraavya Pradeep for TheoryOfStocks, LLC.

In this article, I have computed the performance of Google (GOOGL) & FB (FB) grouped by quarter with a non weighted formula as follows: . Here m represents the number of stocks; Cp & Op represent the closing and opening prices at the beginning and end of a quarter respectively; Q1 to Q4 represents the four quarters since 2011.

As you may observe, the forthcoming quarter between April to June has been historically not favorable for both these stocks. Considering the grouping over a period of seven years, Google has observed a consolidation and FB has made a marginable gains (~2%) during Apr-June. In the contrary, it is important to note that both these stocks rallied between April and June of 2017 & 2018. Will the history follow the trend between 2011-2016 or continue its behaviour similar to 2017/2018?

In the absence of the crystal ball, a smart investor will be cautious in trading these tech giants the next few months.

Here is a quick comparision of three important financial paramters. Market capitalization (mcap) indicates the total value of a company in the stock market. It is generally calculated by multiplying the shares outstanding by the current share price Price/earnings ratio (often shortened to the P/E ratio or the PER) is the ratio of a company's stock price to the company's earnings per share. Investors constantly look for good stocks that are undervalued with the help of P/E. In general, price to earnings ratio less than 20 is considered undervalued. BookValue book value is the value of a stock according to its balance sheet account balance. Traditionally, a company's book value is its total assets minus intangible assets and liabilities. Value investors often find stocks whose book value is less than the market value.

Here are the individual price charts and their respective moving average. Except for Nordstrom, Inc. (JWN) which has seen a substantial price increase after August 7th, 2018, and J. C. Penney Company, Inc. (JCP) which is on a downward streak, other stocks (namely Macy's, Inc. (M), Dillard's, Inc. (DDS) appear to have taken a small breather downwards after crossing the 100 and 200 day moving averages respectively. Assuming history is going to repeat itself, there is a high probability for these stocks to climb upwards in the next six months.

Financial information cited in this article are taken from Yahoo Finance (http://www.yahoo.com/finance); EPS data is taken from Zacks Research (http://www.zacks.com); some of the definitions have been taken from Wikipedia (www.wikipedia.com)

 

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