Facebook’s Fiasco & Tech Outperformance

The tech sector has been boosted by a combination of product innovation and positive fundamentals in recent months, though.

U.S. based technology companies are sitting on a boatload of cash. Apple has around $100 billion, Google has $47 billion in its coffers and Microsoft has roughly $58 billion. Some of the capital is already translating into higher dividends for shareholders.

Retail investors weren't the only ones who got burned betting on Facebook.

Several Wall Street's analysts issued buy ratings even before the company went public. Wedbush Morgan and Stern Agee had buy ratings on Facebook at $44 and $46 per share, respectively.

The fact that FB shares are trading lower suggests that underwriters mis-priced the shares, leaving gullible investors and traders with a sack of coal. In contrast, for Facebook insiders, venture firms, and fee-collecting underwriters, the IPO was a bonanza.

Facebook's earnings in the 12-months through March 31 were $972 million on sales of more than $4 billion. That gives the company a gluttonous valuation of 107 times trailing 12-month earnings.