August 24, 2012
The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.
John and David are looking for outstanding businesses that benefit from the network effect. Under the right circumstances, these investments can generate big returns. In their portfolio, three companies stand out in this regard: Google, Facebook, and LinkedIn. What investors are learning is that a network alone isn't enough. If true connections can be established, like the way LinkedIn helps recruiters and job seekers, then the network becomes stronger. That's why John and David are starting to look at Zillow. Zillow is looking past simple ads, and wants to help real estate agents find and serve clients. That’s a connection that will keep people around, unlike, say, a daily deal from Groupon, which doesn't guarantee a repeat visit at full price. In the world of network effects, context is everything. John and David really like LinkedIn and Google. Facebook still has some challenges, its prospects look good. Zillow also looks very promising.
Facebook has been a huge disappointment for investors so far. But there still may be an opportunity here for investors. We've outlined the pros and cons in our newest premium research report. There is a lot more to this company than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.