Facebook

FB-Q

From its top in July, he was looking for a pullback which we've had. FB is still not cheap. His fair market value is $135. It has strong support at $115, which he wouldn't be surprised if it fell back there. All the FAANGs were grossly overvalued. Be careful with FAANGs. He expects another correction.

The noise here has been extreme in the past year (privacy issues, politics), but their latest revenues are up 37% year over year and the number of monthly users is up, not down. Of course, Facebook needs to do further work by spending money on manpower to be better corporate citizens. This is a great franchise and a multigenerational opportunity to buy this at 20x earnings. Ignore the noise. (Analysts’ price target is $192.91)

(A Top Pick Apr 02/18, Up 9%) He sold it, fearing government regulations on this space. He regrets it, but still sees many risks. It's a great company but can't stomach all the risk.

It's gone through one of the biggest cycles from love to hate in a very short time. But social media is not going away, and Facebook commands a huge slice of online advertising. If users leave Facebook, where do they go? Probably to an app that Facebook owns, like Instagram. You see the same ads. FB is heavily oversold and has enormous priving power with advertisers. It dominates.

This has a moat. It's had a nice run recently, though he didn't expect it to have fallen this far to start with. Given all their spending, 2019 will be flat. Be he sees 15% growth beyond 2019. Trades at a fair 17x. A very high-quality company. You can add to it here. It may get cheaper, but you can buy now.

(A Top Pick Oct 17/18, Down 18%) It's been a really bad media year for FB. But step back. In a rising rate environment, you want a company with a good balance sheet. FB has $40 billion in cash and no debt; they earn $5 billion net income per quarter and $20 billion annually--in a class of maybe 20 companies in the world. They dominate social media. You're gonna have these tough years. It was up 50% last year and gave back a lot of that this year. Revenue growth is still 40%.

Why so much volatility? FAANGs are favourites of hedge funds where there's lots of liquid trading. He likes the tech space with huge growth and tailwinds with consumers being these products. Everybody knows FB has been in the news with many hires that impacts their profit margins. But these are temporary issues. They will pass. These are hiccups along the way, but ultimately they will provide great investment returns.

Not a new breakdown. Has been breaking for the better part of the last half of the year. There will be multiple support levels it will pause at. If you own it, he doesn't know if he'd continue to hold it. If you're a new buyer, he definitely would not buy it yet.

Another issue of privacy has surfaced. He views this as part of the broad evolution of social media and he thinks regulation needs to be better defined. He thinks of the company as an investment opportunity, knowing more regulation is coming, trading at less than 20 times earnings with annual growth of earnings above 20%. He sees this as a buying opportunity.

(A Top Pick May 14/18, Down 18%) An October $185 put. He was obligated to buy after he took the premium. His net cost was $175. It's $144 now. If you'd bought the stock, you would've bought it $10 higher; but if the stock had run, you would've done better. He was selling puts at that point, because he felt FB had had a good run and would have deceased (though not a much as happened). He'd sell a covered call against it now.

Owned it for a long time. Sold it two months ago. Scandals were mischaracterized. very profitable in the near future. Major concern is international government regulation. It is the only company that it is not investing in other verticals. All the other large tech companies are investing in Health Care which is a massive opportunity. This company is just trying to create advertising mouse traps.

(A Top Pick Dec 07/17, Down 23%) Had it for along term. It is not about the fundamentals but the sentiment has been pretty negative. They reported 15 quarters of positive earnings surprises but nobody is looking at that right now. Still like it but has some stop losses on it.

He owned it last year. It lost its price momentum but it cracked due to privacy issues and they missed earnings. All tech stocks have struggled since FB's earning report in the summer. But it's now reasonably priced. FB was never massively overvalued like, say, Netflix or Amazon. Great ROE at 28%. It's a little pricey at 18x PE, but it's expected to grow 30-40% in 2019. It's close to a level where he'd buy it again.

Recently bought a small position. A high-quality business that dominates online advertising, advertising that will continue for a long time. There's a lot of negative publicity now, correcting 40% in the past few months, but long-term this remains a good company. Trades at 16.5x next year's earnings. Growing at 20%+ per year. This will now attract value investors. The market has overreacted. Good for a long-term hold.

Be very patient with this and the tech sector. Tech is a value play now, no longer a growth one. FB is still a good company, despite current issues. Its sell-off gives investors an opportunity now. Look beyond the headline noise and look at the fundamentals instead.