$FB: Buy and Hold Forever?

Dec 7, 2016: Fox Business News just published (here) a very optimistic article on Facebook stock (FB) saying "..by nearly any measure...FB...has unlimited upside as the world transitions to digital." Glowing optimistic forecasts about technology stocks always interest the Random Stock Walker given their gee-whiz appeal, so lets run FB through our models.

The Random Stock Walker forecast through next year is displayed above (the black line is the stock price, the green dashed line is the upper 98% bootstrap prediction interval, the dashed red line is the attractor path, and the dashed blue line is the lower 98% bootstrap prediction interval). The attractor graph looks pretty good with small deviations around the attractor path (time to take earnings above the attractor path, time to buy below the attractor path). With the stock below the lower prediction interval right now, it would seem to be a good time to buy.

However, if we extend the forecast out to 2060, things do not look so good. The upside (upper 98% prediction interval) does indeed look great, but the downside (lower 98% prediction interval) is essentially zero. In other words, there is an equal chance that if you buy FB right now, at anytime in the future it could be worthless. One can invent any number of reason why this might happen but wide variability prediction intervals (high risk) is an essential feature of most tech stocks.

NOTE: One positive side of the FB state-space prediction model is that the stock price is being driven by growth in the world system. A negative side, as has been mentioned above, is that FB is a tech stock.

$TWTR: When Will It Be Acquired?

UPDATE SEP 27, 2016: My sources and the media (here) say that there are multiple potential bidders for Twitter (Google GOOGL, Salesforce CRM, Disney DIS, Verizon VZ, MicroSoft MFST and even Apple AAPL). My sources also warn me that acquisitions with multiple buyers are not things that can be predicted since there are many other factors (end-of-year tax write-offs, etc.) in addition to sheer randomness--a lesson for all forecasters.

SEP 26, 2016: The Random Stock Walker has been keeping his ear to the ground and hears word from knowledgeable and interesting people (who may just be trying to distract him from other research) that Twitter is about to be sold (TWTR is the stock symbol link where you will find that analysts are being very public about a Google takeover). My first question is when might this happen?

The time plot above displays the attractor path for TWTR (the dashed red line) and the 98% bootstrap prediction intervals (green and red dashed line). Currently, TWTR stock is in an area of improbably high valuation (above the upper 98% prediction interval). If we look at when the prediction intervals will hit zero (a better time to buy the company rather than right now) you can see that the model is predicting either a sale (or a collapse of the stock and maybe the company) sometime in 2017.

Let's now wait until next year and see how good the Random Stock Walker Models actually are.