Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Firsthand Technology Value Fund Inc (SVVC), Facebook Inc (FB): Don’t Fall for This Twitter Trap

It will be months before Twitter’s IPO possibly hits the market, but there was at least one publicly traded investment on the move today after yesterday’s filing by the micro-blogging giant in anticipation of going public.

Firsthand Technology Value Fund Inc (NASDAQ:SVVC) — a closed-end fund that rallied last year when Facebook Inc (NASDAQ:FB) announced that it would be going public — opened 8% higher today. Its second-largest holding just happens to be Twitter.

Now, don’t get too excited. Before you fire off a buy order, keep in mind that Firsthand Technology Value Fund Inc (NASDAQ:SVVC) soared a whopping 76% in a single week last year, only to give most of that back.

That rally lacked common sense, and that was months before Facebook Inc (NASDAQ:FB)’s IPO fell flat. The tech fund’s NAV was $23.92 per share at the end of 2011, and 82% of that was stocked away in cash. There was no reason for it to trade as high as $46.50 the month before Facebook went public. It was buying privately placed shares at roughly the same price that retail investors would.

To be fair, Firsthand Technology Value Fund Inc (NASDAQ:SVVC) is in a better place these days. For starters, it’s now showing a profit on paper with its Facebook Inc (NASDAQ:FB) investments, as the social networking juggernaut has bounced back in a major way. It’s actually also trading at a surprising discount — even after today’s opening pop — of its estimated gross assets of $25.80 per share.

The fund is still holding a lot of cash — 52% of gross assets — as of the end of last month.

This is still a concentrated portfolio, with big bets on Facebook Inc (NASDAQ:FB) at 11.2% of the fund’s gross assets, and a 10.4% position of the fund’s gross assets in Twitter.

It’s that Twitter investment that could trigger another insane rally in Firsthand Technology Value Fund Inc (NASDAQ:SVVC). Buying in now, while the fund is trading near its NAV, is fine. Chasing it — as speculators are bound to do in the coming days as they seek out ways to play the Twitter IPO — will be dangerous and stupid.

Investors thinking that they had found the perfect Facebook Inc (NASDAQ:FB) coattails play last year were burned, and that will happen this time around if you wind up overpaying for this closed-end fund later this month.

Know what you’re buying. Know how much you’re paying. It may be fine to ride the potential rally here for now, but you better make sure you know when to jump back out.

The article Don’t Fall for This Twitter Trap originally appeared on and is written by Rick Munarriz.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!