Facebook surfing pays off for some investors

BOSTON Fri Aug 9, 2013 11:16am IST

A women works with her computer which displays Facebook logos on the screen in Bordeaux, Southwestern France, January 30, 2013. REUTERS/Regis Duvignau/Files

A women works with her computer which displays Facebook logos on the screen in Bordeaux, Southwestern France, January 30, 2013.

Credit: Reuters/Regis Duvignau/Files

Related Topics

Stocks

   

BOSTON (Reuters) - Nabil Elsheshai jokes about wasting time on Facebook, but his surfing has paid off.

A senior equity analyst for Thrivent Financial in Minneapolis, Elsheshai had advised his firm not to buy Facebook Inc's (FB.O) initial public offering last year at $38 per share due to concerns that it was overpriced.

But Elsheshai, 44, continued to use Facebook in his personal time, and this spring he noticed advertisements from companies like eBay Inc (EBAY.O) and auto makers showing up on his "news feed," a centrally displayed part of the website.

After more quantitative research, he was convinced that Facebook was getting its advertising strategy in order. Elsheshai suggested to Thrivent it was time to buy the stock, advice that the faith-based firm followed in June. The $950 million Thrivent Large Cap Growth Portfolio bought 572,200 Facebook shares that month, according to Lipper data, a time when the stock was trading around $24.

Those bets looked prescient on July 24, when Facebook reported stronger-than-expected quarterly results and its shares shot up 40 percent in the following week to top $38 for the first time since the IPO. The shares closed at $38.54 on Thursday.

Thrivent's timely investment belie the challenges of investing in the world's largest social network.

Facebook's public offering was one of the most anticipated of 2012, but concerns about whether the company would be able to grow its mobile advertising business helped push down the stock to as low as $17.55 last September.

Kathryn Spica, a mutual fund analyst for Morningstar in Chicago, said valuing Facebook has been a common problem for many fund managers. As with other young Web companies, it has not been clear how well the young company could monetize the heavy traffic to its site.

"It's an unusual stock. It's hard for the industry to get a grasp of how they'll make revenue," she said.

Elsheshai described Facebook as opaque and said his own impressions as a user helped give him confidence to act against what was fairly bearish commentary at the time.

He said the negativity had appeared to be mainly anecdotal, such as stories of teenagers switching to other social media services, but that did not match his own experience or the data he saw.

"It seemed clear you were starting to see a broader set of advertisers" on the service, said Elsheshai, who is based in Minneapolis and has 462 Facebook "friends" at last count.

Another enthusiast for Facebook is Chris Carter, co-manager of the $549 million Buffalo Growth Fund (BUFGX.O), advised by Kornitzer Capital Management in Shawnee Mission, Kansas.

The Growth Fund had bought Facebook shares last year and added to the position this spring on Carter's suggestion. It now holds around 370,600 Facebook shares, up from about 300,000 at the end of February, according to Carter.

Carter, 34, said he was encouraged by Facebook's strength in advertising on mobile devices, where the ads stand out compared to those that appear on desktop machines.

Seeing ads on the Facebook app on his own iPhone 5 helped inform his decision, said Carter, who has about 175 Facebook friends. "If I hadn't seen that, I would be wondering what's up," he said.

Not every investor relied on his own experience with Facebook. Jay Welles, a senior equity analyst at Manning & Napier Inc (MN.N) in Fairport, New York, said he followed Internet tracking firms such as comScore, which continued to report growing traffic to Facebook.

Welles recommended his firm buy Facebook shares in the spring, and said it has not sold them since.

"We felt the user base was very sticky. Facebook had a lot of hooks into the users," said Welles, 35. He uses LinkedIn (LNKD.N) but not Facebook. "My own personal experience isn't the relevant factor," he said.

The $1.2 billion Manning & Napier Equity Series (EXEYX.O) fund held 442,520 shares of Facebook at the end of July, up from 198,660 at the end of April, according to the firm's website. (Reporting By Ross Kerber; Editing by Lauren Young and Leslie Gevirtz)

FILED UNDER:

Tech Wrap

Reuters Showcase

India Cricket Chief

India Cricket Chief

Former ICC boss Dalmiya returns as BCCI chief.  Full Article 

S&P on Budget

S&P on Budget

Budget shows commitment to keep fiscal deficit low - S&P.  Full Article 

New Phone

New Phone

Samsung unveils sleek new Galaxy phones to battle Apple.  Full Article 

MH370 Search

MH370 Search

Interview: Australia says hunt for missing MH370 jet may be called off soon.  Full Article 

Blogger's Murder

Blogger's Murder

Bangladesh says arrests main suspect in U.S. blogger Avijit Roy's killing.  Full Article 

England under Fire

England under Fire

Changes demanded after England's latest World Cup flop.  Full Article 

Anti-Putin Rally

Anti-Putin Rally

Anti-Putin protesters rally in New York after Nemtsov's murder.  Full Article 

Brit Awards

Brit Awards

Brit awards shake up British album chart, boost Sam Smith.  Full Article 

Lathmar Holi

In Pics: Lathmar Holi

Images of "Lathmar Holi" at Nandgaon in Uttar Pradesh.  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage