Moon Capital Management, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. Moon Capital Management offers a variety of investment management and planning services. The firm’s wealth management services and private investment fund put its experience, discipline, and philosophy to work for its clients. Moon Capital’s stock portfolio declined by approximately 11 percentage points for the recent quarter. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Moon Capital Management 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 $458.0 billion market capitalization. Meta Platforms, Inc. (NASDAQ:FB) delivered a -49.67% return since the beginning of the year, while its 12-month returns are down by -54.23%. The stock closed at $169.27 per share on July 22, 2022.
Here is what Moon Capital Management has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q2 2022 investor letter:
“For most of the past decade, Meta’s share price has marched almost lockstep with its meteoric rise in earnings and free cash flow. That was until almost a year ago. Since August 2021, Meta shares have dropped more than 50 percent, while its free cash flow has increased 60 percent.
While Meta is facing certain headwinds related to changes in Apple’s latest operating system release (iOS 14’s optional identifier for advertisers (IDFA) blocking) that impact Meta’s ability to track and thus effectively target its user base, we believe the company will be able to effectively mitigate these changes. Meta estimates that these changes will result in a $10 billion headwind in 2022. To the extent that the company solves the IDFA problem over time, improvements in returns on advertising spending could result in a partially recovery of revenue dollars that creates a future tailwind.
Meta is also spending aggressively on augmented and virtual reality through the company’s Reality Labs division. Meta’s vision is that, over the next decade, the expansion of virtual reality may create the next major computing platform after mobile. The company is investing heavily in this area, dedicating more than $10 billion per year in the form of operating expenses running through the income statement. While the company is currently being penalized for these investments, we think it is more appropriate to view these costs as free options, given that the plug can be pulled at any time if the investments don’t develop into meaningful revenue contributors.
Meta’s core advertising business is clearly entering a more mature phase of its life cycle – or, at least, it is no longer the tiny newcomer in the advertising industry. Meta is now a $120 billion-a-year business, more than ten times its size in 2010. Starting from a base of less than $2 billion in 2010, Meta’s revenues have grown more than 40 percent annually. While it is easier to produce 40 percent annual revenue gains with a $2 billion business than with a $120 billion one, we expect that Meta will continue to siphon ad spending from traditional broad-based, “shotgun approach” legacy ad platforms, such as newspaper, magazine, radio and television.”
Photo by Alexander Shatov on Unsplash
Our calculations show that Meta Platforms, Inc. (NASDAQ:FB) ranks 4th on our list of the 30 Most Popular Stocks Among Hedge Funds. Meta Platforms, Inc. (NASDAQ:FB) was in 200 hedge fund portfolios at the end of the second quarter of 2022, compared to 224 funds in the previous quarter. Meta Platforms, Inc. (NASDAQ:FB) delivered a -8.06% return in the past 3 months.
In July 2022, we published an article that includes Meta Platforms, Inc. (NASDAQ:FB) in 10 Stocks Billionaire Tiger Cub Rob Citrone is Buying. 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.
