by Mike Kapsch, Investment U Research
Friday, June 8, 2012
I don’t get to say it often, but the investing herd was spot on last month.
From Main St. to Wall Street, the resounding majority of people everywhere said they weren’t going to invest a dime in the Facebook (Nasdaq: FB) IPO.
And it’s a good thing most people didn’t.
Because after hitting a high of $45 on May 18th, shares have fallen as much as 42%.
Yet even though buying into Facebook’s IPO would’ve been a huge mistake by today’s standards, the darling of social media just may have a use for investors after all.
Turning Facebook “Likes” into Profits
I’ve had a Facebook page for a year and a half now.
And, yes, I comment and click “like” on things I find interesting or funny. But don’t give me a hard time about it.
Online news provider, VentureBeat, reports 845 million users give out 2.7 billion “likes” and comments every day.
It’s an incredible amount of information.
And a new online trading service that just launched Monday has figured out a way to profit from this mountain of data.
It’s called Motif Investing.
But it’s not exactly just another E*Trade or Scottrade.
Investing in the Power of an Idea
Motif Investing allows people to buy into investment ideas and themes (hence the name “motif”).
They do this by packaging ideas into collections of 20 to 30 stocks and selling them to investors for $9.95, or about the same price as a single-stock trade on E*Trade.
For example, Motif’s “Faceboook” portfolio represents the top 20 most “liked” Facebook brands. In 2011, the number of “likes” for these companies nearly doubled. Who knows, maybe it’s not really related that much, but Motif’s “Lots of Likes” motif is up 20% over the past year.
There are also 50 other motifs to choose from. And that number is sure to grow.
Some of my favorites include how to play the rise in income inequality, preparing for the housing recovery in the U.S., and cashing in on soaring internet usage on mobile phones.
Motif gets even better too. It allows you to personally customize each of the portfolios to fit your investment needs or preferences.
So if there’s a stock you don’t like, you don’t have to pray some mutual fund or ETF manger will eventually get rid of it. At any time, you can sell a stock for a one-time processing fee of $4.95. You can also change the weighting of any stock in the portfolios as well.
These are pretty revolutionary features for the online brokerage industry if you think about it. Can you imagine actually having full control over a mutual fund or ETF? You can become your own Peter Lynch…
Forbes says, “What’s compelling is it actually mimics what many of the best macro hedge fund managers do.”
It’s true. Motif just puts the power in the hands of individual investor.
All of these features has attracted some pretty powerful people to the service too.
Ex-Merrill Lynch boss Sallie Krawcheck is backing the company. There are former Microsoft (Nasdaq: MSFT) executives on board. The longest serving chairman of the SEC, Arthur Levitt Jr., is also backing Motif to name a few.
I can’t say whether or not Motif represents the next era of investing. But I do like where it’s going. And I think, as more investors catch on, Motif could have a significant impact on the future of the online brokerage industry.
Mike KapschMotif Investing: How Facebook is Generating Profits For Investors After All,