Facebook becomes new darling of the retail trader

Published Thu, Jan 29 201510:12 AM EST

In a new age example of "buy what you know," the retail investor really loves Facebook's stock, continuing to pile into the shares in the new year after a strong 2014, according to a look this week at more than 6 million retail accounts with TD Ameritrade. The small investor is betting that the company's enormous user base of 1.4 billion, of which they are a loyal part, gives Facebook the scale to resist an economic downturn and a protective moat more associated with the blue chips of old like AT & T and IBM. "People see it as a new bellwether," said JJ Kinahan, chief strategist at TD Ameritrade. "Social media has become such a part of our life. No one raises their eyebrows when its a top held stock just as IBM or GE was five,10 years ago." Facebook cracked the top 10 list of the most-traded stocks by TD clients this month and moved into the top five this week ahead of earnings. The trading bias has been mostly bullish and the company has largely delivered on that over the last year. The social network posted a 49 percent sales increase in the fourth quarter, according to results delivered Wednesday after the bell, as users dove into the company's video platform and mobile app, consuming more lucrative advertising in the process. Kinahan joked that while traders have been stressed out by the volatility of the 2015 market they likely still managed to post pictures of their cats on Facebook during the big swings. Apple is still king among the cult stocks for retail users as it is the top traded stock in TD client accounts, but Facebook is gaining fast. Read More Strongest economy in the world? Apple As evidenced by Apple, that can be a very good thing and sometimes, very bad. As long as Facebook can keep executing, the retail interest may allow the stock to trade at a slightly higher valuation than other less loved social media stocks like Twitter . However, a stumble could see the stock come under pressure more so than other shares that don't have such a great retail interest as the small investor moves on to the next hot thing. Facebook has doubled since going public in May 2012, greater than a 50 percent gain by Apple over the same period. Meanwhile, IBM and AT & T are both down over the last 2 ½ years. Read More Goldman telling clients to take on risk Wall Street loves Facebook as well with 85 percent of analysts recommending buying the shares, according to FactSet. That's greater than the 75 percent and 79 percent of the Street recommending Apple and Google , respectively. "Facebook remains our top pick," said JPMorgan's Doug Anmuth in a note Thursday. "FB delivered another strong quarter and we continue to believe the company is extremely well-positioned in an increasingly mobile and social Internet landscape." Disclaimer

Dado Ruvic | Reuters