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Why Investors Should Be Friends With Facebook Inc

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The weight of the evidence continues to point toward the bulls, so investors should work toward becoming heavily invested in FB, says Mike Cintolo of Cabot Market Letter.

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Overall, the market is acting according to plan. The major indexes have traded relatively tightly in recent days, after a huge melt-up in late June and early July.

There has been some churning of late, with the market having a few days that began well, but closed weakly, as volume picked up-a slight sign of distribution.

But that action can be inconclusive. What's more important is that both of my trend-following indicators are positive, and the unwillingness of the market to give back much of its gains to this point is encouraging.

As for individual stocks, the newest addition to my firm's model portfolio is Facebook (NASDAQ:FB), which needs no introduction.

The stock has been on a tear, and to us, it looks like it's entered its first real uptrend, after more than a year of flushing out its post-IPO investors.

After a few quarters of sloppy results, worries about a mobile strategy, and fears of too much investment (as with Amazon (NASDAQ:AMZN)), Facebook recently delivered a stunning report last week-revenues grew an amazing 53% (this for a company with more than $6 billion in revenue!) while advertising revenue grew 61%.

And mobile ad revenue, which was basically zero a year ago, now makes up 41% of all ad sales!

As you'd expect, with more than 1 billion users per month, the earnings power here is tremendous, and the stock, after wearing out investors for more than a year, has exploded higher on record volume. This is the type of liquid, fast-growing, huge-potential stock that growth investors thrive on.

We think it's OK if you want to start with a half-sized position in FB, and then look to add on the way up; the short-term is bound to be volatile after the recent advance. But the power on the rally has been great, and we think institutional investors will be buying shares for a while.

Editor's Note: This article was written by Mike Cintolo of Cabot Market Letter for MoneyShow.

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No positions in stocks mentioned.
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