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By Jason Stipp and Jeremy Glaser | 03-28-2014 08:00 AM

The Friday Five

Not crushing on IPOs, Facebook's virtual strategy, a setback for Citi, and more.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five: five big stories from the market this week and Morningstar's take.

Joining me, as always, with The Friday Five is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: You're welcome, Jason.

Stipp: Your first big story this week: Candy Crush maker King had its IPO, and it was not seen as such a sweet deal by the market. You say this is not terribly surprising.

Glaser: If you'll excuse me, they really got crushed in the first day, losing over 15% from that IPO price.

What's happening here is that the market is recognizing--in my view, correctly--that King just doesn't have a competitive advantage or a sustainable economic moat in any way. They have this one franchise, Candy Crush, that's doing extremely well, and some other games that aren't doing quite as well, that are producing an incredible an amount of cash right now, but it's not clear that they can sustain that for any period of time.

We're in the infancy of mobile gaming, and we've already seen any number of franchises become incredibly large before shrinking very, very rapidly, and there is no saying that Candy Crush isn't going to do the same thing, or that management has any kind of special expertise to use that cash to buy other games that people are going to be interested in. So the market dumped these shares pretty quickly.

The big takeaway for individuals is that maybe the IPO market isn't always the place to be investing, or a place to be looking for investing ideas. Those companies are there selling shares [in an IPO] because it's a good time for them, not because it's a good time for you. And even if it's the case that a company has a great competitive advantage, a great business that you might want to own, you're probably better off waiting for the market to give you an opportunity to buy it at a discount, to buy it at when it's being beaten down because of a bad quarter, versus buying it right at the offering, and then you could hold it from there.

Stipp: Facebook announced this week they are going to spend $2 billion on a company called Oculus, which is a virtual reality company. But why Jeremy? What's the strategy behind this acquisition?

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