Meta Plunge Lures Value Buyers as Growth Funds Flee
For years, investors valued Facebook’s parent company as if its growth would never falter. Now that it has, fund managers who buy cheap, out-of-favor stocks are finally getting a chance to own shares of Meta Platforms Inc.
Stock pickers at value firms Dodge & Cox, First Eagle Investment Management and Artisan Partners bought millions of Meta shares this year. Index-tracking investors now will be buying too: After FTSE Russell’s annual overhaul of its equity benchmarks, Meta on Monday joined other former growth darlings Netflix Inc. and PayPal Holdings Inc. in the firm’s value indexes, which serve as the basis for billions of dollars of passive portfolios.
Meta began to attract bargain hunters after the company announced in February that Facebook’s user growth had stalled, sending the shares plunging. The stock last week reached its cheapest level ever, relative to earnings. For investors who believe the problems at Facebook are temporary, that’s a buying opportunity.
“We own Meta and are very upbeat about it here,” said David Katz, chief investment officer at value firm Matrix Asset Advisors. “You want to find dynamic growth companies at value prices. Meta has a good outlook, but it is being priced as though it’s in a secular decline.”
Value funds look for stocks that are cheap relative to earnings or book value, often because of business setbacks that at least temporarily derail sales growth or profitability. Until recently Meta didn’t fit the bill: The stock traded for an average of 38 times estimated earnings in the first five years after its 2012 initial public offering as more people flocked to Facebook, Instagram and WhatsApp.