We should never blindly copy any investor's moves, no matter
how famous, talented, or successful the investor. Still, it can
be useful to keep an eye on what smart folks are doing. 13F forms
can be great places to find
intriguing candidates for our portfolios
For example, a glance at Lone Pine Capital's
latest quarterly 13F filing shows that it closed out its
, selling 2 million shares that would be worth $148 million at
the recent share price.
Why pay attention to Lone Pine Capital?
Lone Pine Capital, founded by Steve Mandel in 1997, is one
of the biggest hedge fund companies around, with a reportable
stock portfolio worth $24.7 billion as of June 30. It has
reportedly outperformed the
handily since inception. Like many value investors, Mandel is
known to dig deep into companies, aiming to buy undervalued
Why sell Facebook?
Why would anyone want to sell shares of Facebook? Well, some fear
that it's overvalued -- after all, the stock is up over 80% in
the past year and more than doubled in 2013. Its recent P/E
ratio tops 90, and even its forward-looking P/E approaches
Another concern bandied about is that many teens have lost
interest in the site, favoring other platforms such as Snapchat
and Instagram. Still, the
factor appears to not be as bad as feared -- and besides,
Facebook owns Instagram.
Also consider a Warren-Buffett-style reason to sell (or,
really, not to buy in the first place): Facebook is in a
fast-changing competitive landscape, and it's pretty much
impossible to estimate how it will be doing in a few years. The
company's momentum is strong, and its scale and network effects
give it great competitive advantages, but Facebook could still
fall out of favor and lose ground to a rival.
Why buy Facebook?
Despite all those concerns, there is still ample reason to buy or
. Let's start with its valuation, which doesn't seem so sky-high
if you factor in the company's growth rate, free cash flow of
more than $3 billion annually, and rising profit margins. (Its
gross margin was recently around 80%, and net margin tops
strong second quarter
, revenue surged 61% from a year ago, earnings per share more
than doubled, and 61% of advertising revenue came from its mobile
platform, up 50% from the year-ago level. The mobile realm is
becoming more and more important as digital advertising grows
briskly. Facebook is taking market share in that arena -- largely
expense -- and is also a key player in
Beyond its strong current performance, Facebook is also poised
for significant future growth, including from international users
in developing markets. The company sports roughly 1.3 billion
average monthly users, and every penny collected from each of
them adds up to a lot of money. There's
a lot of potential
for this company if it keeps executing well.
As an example of how Facebook can extract value from its users
beyond selling advertising, consider that the company is testing
on its pages as it aims for a bigger piece of the e-commerce pie,
which is estimated at $262 billion this year and near $370
billion by 2017.
Lone Pine Capital may have sold off its Facebook position, but
risk-embracing investors might want to consider buying instead --
or at least adding it to a watchlist and waiting for a pullback.
(Note, though, that I waited for a pullback when shares were in
the low $20s. They recently approached $80, and I'm still
Here's another place you might find Facebook
Apple recently recruited a secret-development "dream team" to
guarantee its newest smart device was kept hidden from the
public for as long as possible. But the secret is out, and some
early viewers are claiming its everyday impact could trump the
the iPad. In fact, ABI Research predicts 485 million
of this type of device will be sold per year. But one small
company makes Apple's gadget possible. And its stock
price has nearly unlimited room to run for early in-the-know
investors. To be one of them, and see Apple's newest smart
This $25 Billion Hedge Fund Sold Facebook Inc.
originally appeared on Fool.com.
Longtime Fool specialist
whom you can
follow on Twitter
owns shares of Apple and Google (C shares). The Motley Fool
recommends Apple, Facebook, Google (A shares), and Google (C
shares). The Motley Fool owns shares of Apple, Facebook, Google
(A shares), and Google (C shares). Try any of our Foolish
free for 30 days
. We Fools may not all hold the same opinions, but we all believe
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makes us better investors. The Motley Fool has a
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