The market is falling as many worry that rising tariffs will dampen the U.S. economy. I see this weakness as a chance to buy Facebook and AMD, two companies that are doing well and don’t require a strong economy to continue to do so.
Facebook is the top holding of two of my best performing managers this year. It is about 10% of Tony Mitchell’s Internet Fund (up 30.62% YTD), and it’s 16.37% of Robert Frazier’s Medium Term Value Fund (up 29.16% YTD). In contrast, Facebook is just 1.89% of the S&P 500.
Robert Frazier last purchased Facebook this past November when it was trading at $133 after taking the blame from all sides for the outcome of the mid-term elections. Today it’s at $190 for a better than 40% gain in six months.
Last year, Mark Zuckerberg devoted much of Facebook’s conference calls to setting expectations for slowing revenue growth and increasing costs. In the most recent quarter, Facebook exceeded revenue expectations.
The Federal Trade Commission (FTC) has been investigating whether Cambridge Analytica (a political consulting firm) had improper access to the data on 87 million Facebook users. The investigation, which began in March 2018, is likely to result in a fine of between $3 and $5 billion. Facebook has already taken a $3 billion one-time charge in anticipation of this. That they can do this is testimony to the strength of their business.
Facebook has 2.38 billion monthly active users, which generate quarterly revenue of $6.42 per user (on average), up 16% from a year ago.
Advanced Micro Devices (AMD) was the best performing stock in the S&P 500 for 2018 with an almost 69% gain. Tony Mitchell first bought AMD in October 2014 at $3.45. Today it trades at $26.
While you don’t often see a great performance like AMD had in 2018 followed by another great performance in the following year, there is a good…