Facebook Still Has Believers Among Fund Managers
BOSTON - Few investors have been hitting the "like" button for Facebook. The stock has lost nearly half its value since May’s highly anticipated but botched initial public offering.
Yet some mutual fund managers continue to see strong long-term potential in the social network, and expect the stock will eventually recover.
Hundreds of funds own Facebook stock, with a select few counting it among their largest holdings. That means you could own a small stake in Facebook even if you took a pass on the IPO. Mutual funds are required to file quarterly disclosure reports, and enough time has passed that they’re now beginning to report whether Facebook is among their holdings.
The biggest fund industry believer is Morgan Stanley Investment Management. Its funds dominate a list of those with the largest proportions of Facebook stock in their portfolios, according to Morningstar. This unit operates separately from the bank that helped underwrite Facebook’s IPO.
Six Morgan Stanley funds count Facebook among their top five holdings, according to the funds’ latest reports through July. The stock made up 5.7 percent of the portfolio at the group’s largest fund, the $1.6 billion Morgan Stanley Focus Growth fund (AMOAX). The other five had weightings ranging from 4.7 percent to 5.5 percent. Four are team-run funds, with Morgan’s Stanley’s Dennis Lynch as lead manager.
A Morgan Stanley spokesman said the company and Lynch declined to comment on Facebook’s prospects.
Shares opened at $38 on its opening day, but tumbled over the next seven trading sessions. Problems included first-day trading glitches, concerns about Facebook’s revenue potential, and lawsuits filed by disgruntled shareholders. The stock has traded below $30 since mid-July, and briefly sank below $18 last week.
Shares rallied on Wednesday, gaining nearly 8 percent, after CEO Mark Zuckerberg commented on the company’s prospects in his first interview since the IPO. Zuckerberg said Facebook continues to see significant revenue potential from users who access its site using mobile devices, rather than on desktop computers.
One challenge: Mobile screens leave less space to show revenue-generating advertising alongside Facebook’s content. Facebook has so far earned very little revenue from its mobile application, a revenue stream that began just a few months ago.
But Christopher Baggini, manager of the Turner Titan Fund (TTLFX), says Facebook is starting to successfully address the mobile challenge. Baggini is also a stock analyst covering Facebook at Turner Investments, where his fund and others own the stock.
He says Facebook was late to develop a mobile product in a way that could generate profits. "But a lot of the newer products that are coming out are going to allow them to do that," he says.