Farrer Wealth Advisors: “Meta (FB)’s Valuation are at Levels Where Selling Makes Little Sense”

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Farrer Wealth Advisors, an investment management firm, published its “Farrer Wealth Managed Solution” first quarter 2022 investor letter – a copy of which can be downloaded here. This quarter was tough on the managed solution, and while the fund always expected its portfolio would suffer 30%+ drawdowns at some stage, they never thought it would be in the first nine months of launching. The benchmark bottomed on 8th March, and since then has returned 8.90% whereas our Managed Solution has returned 15.67% (the below in USD; 8th March to 1st April 2022). Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Farrer Wealth Advisors mentioned Meta Platforms, Inc. (NASDAQ:FB) and explained its insights for the company. Founded in 2004, Meta Platforms, Inc. (NASDAQ:FB)  is a Menlo Park, California-based multinational technology conglomerate with a $558.4 billion market capitalization. Meta Platforms, Inc. (NASDAQ:FB)  delivered a -38.83% return since the beginning of the year, while its 12-month returns are down by -36.71%. The stock closed at $205.73 per share on April 28, 2022.

Here is what Farrer Wealth Advisors has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q1 2022 investor letter:

Facebook/Meta: We discussed our thoughts on Meta’s earnings in this blog post, so we won’t belabour some of the points. But in a nutshell, Meta’s stock was hammered post earnings after they revealed the extent to which the iPhones iOS 14 changes impacted both ad targeting and measurement. The market was also unconvinced of Zuckerberg’s $10 billion/year investment into their Reality Labs business, as they work to develop their version of the metaverse. Our thoughts are that while we share the market’s healthy scepticism for the metaverse project, the core businesses have shown signs of bouncing back and expanding new revenue streams such as through the monetization of Instagram Reels. We further think the company’s valuation (trading at less than 10x next year’s EBITDA) are at levels where selling makes little sense. Now certainly that implies that the market doubts Meta’s terminal value, so metrics like daily active users and monthly active users need to be watched carefully. We did not add any capital to the position after earnings, and we will reassess capital allocation to the business (or away from it) based on progress made by the company in subsequent quarters.”

Photo by Austin Distel on Unsplash

Our calculations show that Meta Platforms, Inc. (NASDAQ:FB) ranks 3rd on our list of the 30 Most Popular Stocks Among Hedge Funds. Meta Platforms, Inc. (NASDAQ:FB) was in 224 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 248 funds in the previous quarter. Meta Platforms, Inc. (NASDAQ:FB) delivered a -31.81% return in the past 3 months.

In April 2022, we also shared another hedge fund’s views on Meta Platforms, Inc. (NASDAQ:FB) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.

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