The Investing Gurus Losing Money on Facebook

Some of the world’s most noted funds are losing money on Facebook (FB, Financial) as the company battles with a crisis over how it handled users’ data.

Facebook, one of the five largest holdings in the portfolios of David Tepper (Trades, Portfolio), Spiros Segalas (Trades, Portfolio) and Frank Sands (Trades, Portfolio), has plunged 8% year to date, erasing gains made all the way back to October. The market priced Facebook at $165.26 per share Thursday afternoon, down from its 52-week high of $170.27.

Facebook spooked investors this week as it came to light that a data mining firm, Cambridge Analytica, may have obtained users’ data and used it to sway the U.S. election in favor of President Trump. In a blog post Wednesday, Facebook CEO Mark Zuckerberg said he had learned that the data from the breach, which occurred in 2013, had not been deleted in 2015 as some news outlets reported.

Zuckerberg went on to list steps the company would take to safeguard users’ data in an effort to assuage mounting concerns among users about the vulnerability of their information. Principally, Facebook will audit all of the apps using its platform to ensure developers are not improperly using data.

“Although this has been a dark chapter in the Facebook story, we continue to believe the Cambridge risk is ‘manageable’ if handled well by Zuckerberg & Co. with breaking his silence a good first step to putting this PR nightmare slowly in the rear view mirror,” Daniel Ives, head of technology research at GBH Insights, said in a research note. “There is still more work to be done for Facebook to restore confidence and make sure regulatory crosshairs do not meddle with its business both in the Beltway and EU, however we continue to be buyers on weakness in shares of Facebook as we believe a lot of this bad news is now priced into the name.”

Ives maintained his “highly attractive rating” and $225 price target on the company.

The company has had enduring interest among investors tracked by GuruFocus. It was their 24th most-bought stock of the S&P 500 in the fourth quarter and their sixth most purchased tech stock. For all U.S. funds above $100 million, Facebook held even more appeal. It was the third most purchased stock overall and second most popular tech stock.

The largest position of those tracked by GuruFocus, as of the fourth quarter, belonged to Frank Sands (Trades, Portfolio), chairman and founder of Sands Capital. Sands Capital owned 12.65 million shares, reflecting 0.44% of Facebook’s shares outstanding. Sands trimmed the position by 9.06% in the fourth quarter.

Having purchased the stock more than five years ago, Sands boasts an estimated gain of around 369% on its Facebook stake.

Spiros Segalas (Trades, Portfolio), founder, president and chief investment officer of Jennison Associates, holds 0.24% of Facebook’s outstanding stock, with 6.99 million shares. By starting the position in the fourth quarter of 2015, Segalas has an average gain of 53%. He reduced the position in the fourth quarter by 13.71%, making it his fifth-largest position.

Segalas’ Harbor Capital Appreciation Fund returned 36.59% in 2017, versus 30.21% in the S&P 500 index.

Third is David Tepper (Trades, Portfolio), whose massive Appaloosa Management hedge fund owns 5.53 million shares of Facebook, totaling 0.19% of its outstanding stock. With a relatively recent purchase dating from the second quarter of 2016, Tepper has only an approximate gain of 7% on the position.

He also increased the position in the fourth quarter by 67.56%, adding 2.23 million shares.

By the end of Thursday trading, Facebook had declined 2.66% to $164.89 a share.