What you're missing is called momentum investing. People are riding on the momentum of Facebook based on trailing properties from the last 3/6/12/x months [1].

What you're missing is called momentum investing. People are riding on the momentum of Facebook based on trailing properties from the last 3/6/12/x months [1]. If you were a value investor, like Buffett, and your valuation was based on fundamental analysis, you would have a very hard time making a compelling case that Facebook is fairly valued. The other difficult thing about tech stocks is their store of value is vastly different than traditional industrial companies. Most of where people find value in the business of Facebook is it's the only real central store of more than 1 billion people's personal information. How do you price that? You can't buy a person (intangible asset) like you can buy a machine (tangible asset), but there is a price to having that knowledge. It's also not IP, like the primary intangible asset of biotech and pharma stocks. Can you see why people like Buffett (and his mentor, Ben Graham) don't believe in the Efficient Market Hypothesis? [1] http://www.investopedia.com/terms/m/momentum_investing.asp http://www.investopedia.com/terms/m/momentum_investing.asp