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Bronte Capital: “We Think We Will Make Money in Meta (FB), But We are Not Sure”

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Bronte Capital, an investment management firm, published its “Amalthea Fund” second quarter 2022 investor letter – a copy of which can be downloaded here. The Bronte Amalthea Fund returned 0.1% in June and +7.5% for the 2Q against a volatile market backdrop. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Bronte Capital 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 $429.8 billion market capitalization. Meta Platforms, Inc. (NASDAQ:FB) delivered a -52.37% return since the beginning of the year, while its 12-month returns are down by -55.37%. The stock closed at $160.19 per share on August 01, 2022. 

Here is what Bronte Capital has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q2 2022 investor letter:

"The most notable cheap stock is Meta Platforms (née Facebook). Meta is priced at 3.5 times run-rate revenue, 12 times earnings and under 8 times EBITDA. The earnings are suppressed by large expenditures on a future 3-D world (the “metaverse”) which presumably has lots of revenue opportunities (but which strains our sense of credulity). Whatever – the traditional business has had revenue growth for over a decade and the revenue growth has never gone under 20 percent. Realistically it will now though. Competition from TikTok is a threat, as is increased regulation. Finally, the original Facebook plaform (but not Instagram) has declining appeal to young people. In the twelve months ending 31 March 2022, the company repurchased over US$50 billion in common stock mostly funded by cash generated, but also by running down cash balances somewhat.

To not make money in this stock, the future has to be far worse than the past or present. That is certainly possible. Facebook has behaved very badly, never letting privacy concerns or ethics stand between them and a pile of dollars. The Cambridge Analytica scandal happened to Facebook, not to Google. The European Union in particular has passed privacy regulations that are extremely hostile to Facebook’s business. The future could go very wrong. We think we will make money in this stock, but we are not sure."

Photo by Austin Distel 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 -28.30% return in the past 3 months.

In July 2022, we published an article that includes Meta Platforms, Inc. (NASDAQ:FB) in These 5 Social Media Stocks Are Getting Hammered. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.