IP Capital Partners, an investment management firm, published its second quarter 2022 investor letter – a copy of the Spanish document can be downloaded here. Following its philosophy and rationality as always, the fund consciously kept away from these niche markets. As the fear has spread, however, even the stocks of good companies have suffered – albeit to a lesser extent. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, IP Capital Partners mentioned Meta Platforms, Inc. (NASDAQ:META) and explained its insights for the company. Founded in 2004, Meta Platforms, Inc. (NASDAQ:META) is a Menlo Park, California-based multinational technology conglomerate with a $377.0 billion market capitalization. Meta Platforms, Inc. (NASDAQ:META) delivered a -58.29% return since the beginning of the year, while its 12-month returns are down by -57.87%. The stock closed at $140.28 per share on October 04, 2022.
Here is what IP Capital Partners has to say about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2022 investor letter:
“In early 2022, we ended our investment in Meta, which had been part of the funds since 2018. The main reason was the growing evidence of competitive impact coming from TikTok and the first- and second-order consequences for the company.
First, we have the competition for time, which has become tougher given the incredible ability of the TikTok platform to absorb the attention of its users. While the short-form video format has so far been most successful with young people, we believe it has universal appeal and will continue to penetrate older audiences around the world – which is already visible in the evolving user profile of the video. TikTok.
Meta has already been reacting to TikTok with the Reels initiative on Instagram, but unlike the threat of Snapchat and Stories, it has let the current enemy gain a lot of scale. The network effects between users and content creators on TikTok have already become powerful, which makes this fight long and difficult. We estimate that in the first quarter of 2022, American audiences spent twenty times more time watching TikToks than Reels on Instagram.
The second-order consequences are diverse. To put it mildly, Meta has rightly accelerated the adoption of Reels within Instagram and Facebook. But, with that, it exchanges highly monetized surfaces (Feed and Stories) for a new one that is less monetized, which contributes to a strong deceleration in revenue growth to single digits in 2022 – compared to 37% in 2021.
The attention captured by TikTok, in turn, presents itself as a promising new frontier for advertisers, which leads to adjustments in advertising budgets in their direction and adds more risk to future revenue growth for Facebook and Instagram.
If revenues weakened, spending accelerated. Meta is driving over 20% expansion in costs and expenses and over 50% in fixed capital investments this year to modernize applications, attract content creators to Reels, and overcome measurement and targeting challenges imposed by Apple with the new privacy rules for iOS…” (Click here to see the full text)
Photo by Timothy Hales Bennett on Unsplash
Our calculations show that Meta Platforms, Inc. (NASDAQ:META) ranks 4th on our list of the 30 Most Popular Stocks Among Hedge Funds. Meta Platforms, Inc. (NASDAQ:META) was in 184 hedge fund portfolios at the end of the second quarter of 2022, compared to 200 funds in the previous quarter. Meta Platforms, Inc. (NASDAQ:META) delivered a -16.59% return in the past 3 months.
In September 2022, we also shared another hedge fund’s views on Meta Platforms, Inc. (NASDAQ:META) in another article. 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.