The ‘compelling’ investment case for Facebook
Montaka Global Investments will retain its investment in Facebook despite negative press as it believes investors need to be able to separate the investment case from the media noise.
Facebook was the largest holding in the Montaka Global Extension fund at 13.7% and second-largest in the Montaka Global Long Only Equities fund.
Shares in Facebook had risen 19.6% over the past year but were down 12.3% over the past month after it experienced an outage of several hours, which affected all of its platforms including Whatsapp and Instagram, and from a whistleblower testifying to the US Senate on the dangers of the company being able to “weaken democracy”.
In an investor letter on the Australian Securities Exchange (ASX), Montaka said: “In recent weeks, we observed weakness in Facebook’s share price as the company acknowledged near-term challenges from changes made by Apple and press reports highlighting the harmful effects of social media on children.
“Long term we are confident that Facebook will continue its dominance of online advertising (along with Google) and its investments in artificial reality/virtual reality, e-commerce and the creator economy will pay off massively.”
Speaking to Money Management, chief investment officer, Andrew Macken, added the investment fundamentals for Facebook were “drastically compelling”.
“There is a lot of noise and polarising opinions but you have to separate the societal issues from the investment case and that is drastically compelling to the upside.
“It has an enormous addressable market and is still in the early days for e-commerce and virtual reality, these are growth opportunities for the company in the future that are being valued at zero today but could be billion-dollar businesses in the future.”
E-commerce, in particular, accounted for less than 20% of US retail sales which indicated a substantial area for future growth, a trend which would also benefit firms like Amazon and Alphabet which was also held by both funds.
“These businesses are creating the tools required for businesses, small and large, to create and execute effective marketing campaigns more easily. And at the same time, they are investing to make the consumer transaction experience more seamless and enjoyable,” the firm’s ASX note read.
“There remains enormous runway ahead and the winners are already relatively well-defined.”
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Laura Dew
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