Twitter Inc (TWTR), Netflix, Inc. (NFLX) and Facebook Inc (FB): Prem Watsa Hates These Stocks

A closer look of Fairfax Financial Holdings’ letter to its shareholders uncovers an interesting fact that the three tech-based companies, namely, Twitter Inc (NYSE:TWTR), Netflix, Inc. (NASDAQ:NFLX) and Facebook Inc (NASDAQ:FB), which are usually in the lists of many investors, aren’t the choice of Fairfax’s Chairman and the CEO, Prem Watsa.

Prem Watsa

While briefing the events associated with the company’s investment decision and follow-on action with respect to BlackBerry Ltd (NASDAQ:BBRY), Watsa highlighted that how the leading tech companies like Twitter Inc (NYSE:TWTR), Netflix, Inc. (NASDAQ:NFLX) and Facebook Inc (NASDAQ:FB) are overvalued and could soon turn up into another tech collapse like that of 1999-2000 era. For explaining his case, Watsa mentioned that  Twitter Inc (NYSE:TWTR) listed on the stock exchange right after BlackBerry Ltd (NASDAQ:BBRY) declared its convertible debt issue.

Mr.Watsa added that Twitter Inc (NYSE:TWTR) debuted at a price of $26 per share, which implied a market value of $18 billion. Watsa recalled that even as Twitter’s revenue was close to $665 million and losses as much as $645 million, most of the investors faced difficulty buying the stock unless they belonged to those brokerage companies, which acted as underwriters. Watsa compared that at the time of Twitter’s listing, BlackBerry Ltd (NASDAQ:BBRY)’s market cap was $3 billion, with $8 billion in revenues and $2.6 billion in cash with no debt outstanding except the convertible debt. This means that at $26 per share, Twitter Inc (NYSE:TWTR) was overvalued, but then it is trading near a $55 mark now with $39 billion market cap.

Watsa also compiled a table showing the ballooned market valuation of some of the tech companies. The table lists Netflix, Inc. (NASDAQ:NFLX) with a P/E ratio of 118 and $27 billion market cap, while its Price to Sales ratio is 6.0. Facebook, Inc (NASDAQ:FB) has a $174 billion market cap with P/E and Price to Sales ratio at 116 times and 21 times respectively. They are over speculated and could end worse than the previous tech bubble, concluded Watsa.

Disclosure: none

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!