Fed up with Facebook, U.S. fund managers look for alternatives




A 3D-printed Facebook logo is seen in front of a displayed stock graph in this illustration taken
A 3D-printed Facebook logo is seen in front of a displayed stock graph in this illustration taken  

By David Randall

NEW YORK (Reuters) - Facebook Inc's (FB.O) losses are becoming other companies' gains.

Concerns about the social media giant's declining profit margins and battered reputation have prompted 93 U.S. mutual funds to completely sell out of their positions in the company so far this year, exacerbating a roughly 35 percent decline in Facebook's share price from its highs, according to Refinitiv's Lipper research service.

The selling by fund firms including Fidelity Investments, The Hartford and Putnam Investments combined for a total of nearly 12 million shares, and came amid similar moves to liquidate positions in the company by prominent growth-focused hedge funds. Jana Partners and Third Point LLC, for instance, together sold nearly 3.7 million Facebook shares in the third quarter, according to securities filings.

Funds that have dumped Facebook, whose shares helped lead the broad U.S. market higher the last two years, are now favoring investments ranging from payments companies like Visa Inc (V.N) and Worldpay Inc (WP.N) to consumer companies including PepsiCo Inc (PEP.O) and Chef's Warehouse Inc (CHEF.O) because they expect the troubles at the social media company to continue as it leaves its era of rapid growth behind.

Facebook was rocked by disclosures earlier this year that the personal information of up to 87 million users may have been improperly shares with political consultancy Cambridge Analytica.

"The revelations in the first quarter of 2018 about data privacy issues and the growing global concerns about data security and the potential for increased regulation made it challenging to handicap the required investments to remedy some of these issues, which we anticipated would weigh meaningfully on earnings growth in coming quarters," said Jim Hamel, portfolio manager of the Artisan Global Opportunities Fund (ARTRX.O).

Hamel's fund, which liquidated its position in May, reaped a nearly 400 percent gain on Facebook after buying during its initial public offering in May 2012, which was priced at $38 a share. Hamel said he has used the gains to add to positions in the fast-growing global digital payments industry such as Worldpay, whose shares are up 12 percent for the year to date.

Greg Woodard, managing director at Manning & Napier, said his firm, which began buying Facebook in November 2012 at around $20 per share, sold all its Facebook shares this year as part of a broad move away from cyclical technology companies.

Facebook's "most recent guidance really substantiated the margin contraction that we had started to worry about, and when we looked at the price and our future growth expectations they didn't match up with what the market was forecasting," he said.

Woodard said his firm has added positions in software developer EPam Systems Inc (EPAM.N) and global beverage company PepsiCo, and has been adding to its position in Amazon.com Inc (AMZN.O) on dips.


"BROKEN" STOCK?

While Facebook is now trading at a more compelling valuation following the steep declines in its share price, questions about its ability to maintain and accelerate its growth rate may leave Facebook in a no-man's land between a growth stock that appeals to investors focused on rapid expansion and a value stock that appeals to investors looking for companies that trade at a discount or offer attractive dividends.

"Once a company gets put into the penalty box by a growth investor it's hard to get out," said Todd Rosenbluth, director of mutual fund research at independent research firm CFRA. "When a stock is perceived as a broken growth stock it loses its appeal, whereas a declining stock price for a value stock can often make it more appealing."

Woodard, the Manning & Napier fund manager, said his firm would not purchase shares of Facebook again in its growth strategies, and instead would put the company into a fund that focuses on "companies that need to fix themselves" if he were to buy it again.

For that to happen, Facebook's stock price would need to be "significantly lower," he said. "The gap is not worth putting a number on it."


(Reporting by David Randall; Editing by Jennifer Ablan and Leslie Adler)

COMMENTS

More Related News

Small-business owners: Don't give Facebook, Amazon remote control of your customers
Small-business owners: Don't give Facebook, Amazon remote control of your customers

Online platforms help you build your small business, but if you let them control all of your contacts, they could also control all of your business.

Exclusive: Walmart to make first direct pitch to big corporate ad buyers at New York event
Exclusive: Walmart to make first direct pitch to big corporate ad buyers at New York event

Walmart Inc will meet large consumer goods companies and advertising firms for the first time in New York next week to pitch its advertising business, as the world's largest retailer aims to rev up its website and stores as a platform for other companies to reach customers. The event marks Walmart's first effort to grow its nascent advertising business and heralds the retailer's rising challenge to online ad leaders Alphabet Inc's Google, Facebook Inc and Amazon.com Inc. The event, called "5260," is named after a Walmart store near the retailer's hometown of Bentonville, Arkansas, which is known for being a test lab for retail innovation, Walmart told Reuters.

Coordinated anti-Trump campaign emerges on Instagram: study
Coordinated anti-Trump campaign emerges on Instagram: study

The photo-sharing app Instagram, which is owned by Facebook, said it was investigating the report and had already removed some of the profiles it highlighted. Malign online attacks against Trump's opponents have been well documented, most notably in the 2016 presidential election campaign, when Russian trolls allegedly flooded social media sites to undermine the Democratic challenger Hillary Clinton. Italian analytics firm Ghost Data says https://ghostdata.io/report/GD_IGDJT05.pdf the U.S. president is now facing similar illicit tactics, albeit on a limited scale, with false profiles being created and coordinated online attacks organized to spread a virulent anti-Trump message.

MTV
MTV's 'The Real World' Seasons 16, 17, 28 to Stream on Facebook Watch

MTV and Facebook are teaming up to stream three full seasons of "The Real World" on Facebook Watch, the social media giant's video platform.Starting today, "The Real World" season 16, 17, and 28 will be available on "MTV's The Real World" show page, Facebook announced Monday morning. The three seasons, which were voted on and selected by fans of the show, will lead up to the premiere of MTV's Facebook Watch version of the show, which will launch on June 13. The upcoming season will follow seven strangers who come together at a house in Atlanta, Georgia as every moment of their lives is taped.Also Read: Is Facebook's New Privacy Bet a 'Masterstroke' by Mark Zuckerberg?Produced by...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.