The best time to have bought Facebook shares was late 2012 when they traded under $20 after a May IPO debut at $38. Four years later you’ll have to pay more than $150.
When we launched the Biznews Global Share portfolio in December 2014, I was keen to include Facebook. But procrastinated because the stock seemed expensive having risen to $80 in two years and forgetting that he who hesitates is lost. Well almost, the mistake rectified when a buying opportunity came in October last year when the stock dipped.
As you will see in the latest webcast on our Global Portfolio, we averaged in at $125 a share after our purchases were staggered over three months to December. A smart approach when using the volatile Rand to invest abroad is buying in three equal tranches a month apart. That won’t eliminate price and currency risk, but definitely reduces it.
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Last month I opined that Facebook was theoretically the most vulnerable of the big five tech plays – Apple, Amazon, Google, Microsoft being the others. But did add any reverse would be decades into the future. After spending yesterday morning on the transcript of Facebook’s latest conference call for investors, I’m a serious Facebook bull.
As is the practice in the US, once a quarter Facebook’s top trio – CEO Mark Zuckerberg, COO Sheryl Sandberg and CFO David Wehner – offer investment analysts an open forum. In Facebook’s instance, the calls start with formal presentations by the three covering the past three months, followed by a Q&A.
This is far better than the drip feed approach of many execs who, guided by their investor relations consultants, exhaust themselves (and us) with a string of media interviews and investor roadshows. Doing so ignores an obvious conflict – consultants measure their success by how much they “expose” the CEO; whereas shareholders want their leader to spend all their time actually running the business.
These US quarterly calls also remove barriers of geography and access by delivering the same information to anyone, anywhere who has an Internet connection. This is particularly valuable in the case of pioneering companies like Facebook where so much is to be learnt by combing through the detail, rather than simply relying on the media and its deadline-stressed journalists who are restricted to transmitting the highlights.
My aggressively edited Facebook conference call transcript will be a great help if you’re  considering investing in or just fascinated by one of the world’s greatest young entrepreneurs. Bottom line: Facebook is an incredibly profitable business that has achieved scale, so it benefits from ever widening profit margins (now a record 41%). Zuckerberg and Co are working hard to develop fresh communities of interest, targeting growth from 100m to 1bn members of its Groups. They also bet we’ll be spending ever more time on our mobile devices.
Likely winners? A first stab suggests businesses with communities that coalesce on mobile and those that make or control content to the devices. Like Facebook itself, Apple and Google. In an SA context, Naspers, MTN and Vodacom. Obvious losers? Network television and, indeed, companies that actually make TVs – which are rapidly heading into redundancy. Worth reflecting on, isn’t it?
