Meta Platforms Inc. (FB, Financial), the parent company of Facebook, used to be considered a growth stock. However, the company has become increasingly popular with value investors in recent years.
To understand this shift, we can look to the 13F reports of some of the most successful value investors of all time. According to the latest figures, which mostly detail portfolio holdings at the end of September 2021, names like Li Lu (Trades, Portfolio) and Seth Klarman (Trades, Portfolio) hold positions in the stock.
Baupost buys in
Klarman's Baupost only recently added a holding in Meta. According to 13F data, the fund bought a position in the first quarter of 2020. Based on reports that have since emerged, it was around this time that Klarman was raising fresh capital from his investors.
After buying around 2 million shares in the first quarter (most likely when stock markets around the world plunged as the pandemic took hold), the value fund manager has traded in and out of the holding. At the end of September, Baupost owned just over 1.5 million shares.
Other value investors that own or have been recently buying a position in Meta include Bill Miller's Miller Value Partners (Trades, Portfolio). This fund owned a position of around 300,000 shares at the end of September. It has been an owner since the second quarter of 2017.
Wallace Weitz (Trades, Portfolio)'s Weitz Value Fund owned 150,000 shares at the end of 2021. It first became an investor in the first quarter of 2018.
One of the most storied value funds of all time, the Sequoia Fund counted Meta as its largest individual stock holding at the end of the third quarter of 2021. It had allocated 7% of the portfolio to the company after first buying a position in the first quarter of 2018.
Other major investors include the Hillman Value Fund, ClearBridge Value Trust and David Katz's Matrix Advisors Value.
Value investing shift
I think these numbers illustrate a trend that has been taking place for the past five years. As value stocks have underperformed growth equities during this period, value investors have had to look elsewhere for returns. This has pushed investors outside of their comfort zones into the fastest-growing securities, which may or may not fall within their traditional circle of competence.
I am not saying that any one of these investors has made a significant mistake buying and holding Meta. Up until its disaster of an earnings report last week, it looked as if the company was on an unstoppable growth trajectory, even if shares were beginning to flag. Still, I do think that these trades illustrate the risk of arriving late to the party when investing for growth.
I should note that some of the largest growth funds on the market remain significant shareholders of Meta, although they have been reducing their positions in recent months.
Chase Coleman (Trades, Portfolio)'s Tiger Global Management owned 11.2 million shares in the third quarter of 2019. By the end of September 2021, the position had fallen to just 5 million shares. Maverick Capital's ownership has declined from nearly 4 million shares in 2016 to 500,000 as of the end of September 2021. And finally, the $35 billion Viking Global Investors has reduced its stake down from 7 million shares in the second quarter of 2019 to 1.7 million for the third quarter of 2021.
Looking for returns
Only time will tell which of these investors will achieve better results from their Meta holdings over the next couple of years.
Nevertheless, it is notable that there has been a shift in the company's ownership among institutional investors over the past couple of years. It could be the case that growth investors have seen how the online advertising market is developing in their portfolios and have positioned accordingly.
Value investors, who tend to have limited exposure to the technology sector, may have missed this change. Whatever happens next, this is a great case study of why it is sensible to remain within one's circle of competence at all times.
