Facebook, Dimon, Bezos, Buffet and health care
We thought it would be beneficial for the readers to change up the column a bit to address more of the broader issues impacting the financial markets and investors. With the format below, it is possible to provide information and insight on a more timely fashion with the intent of helping you reach more informed decisions regarding your financial future. That said, we welcome your comments at www.faganasset.com.
This past Wednesday social media giant Facebook announced fourth quarter 2017 earnings per share of $2.21, up from $1.15 or 83 percent over the past twelve months. Revenue jumped 47 percent over the past twelve months to $12.98 billion. Both numbers handily surpassed the consensus estimate which was $1.94. Other metrics of note include the fact that monthly active users rose 14 percent year-over-year (y/y) to 1.40 billion; daily active users also rose 14 percent y/y to 2.13 billion; cash and marketable securities rose by $12.262 billion or 41.6 percent to $41.711 billion from $29.449 billion and total employee count rose to 25,105.
In addition to the above items that are of importance to investors include the fact that Facebook generated an average of $6.19 per user during their fourth quarter, up from $4.01 one year ago and more than double the $2.81 during Q4- 2014.
As part of its quarterly earnings report and consistent with the change in their newsfeed, Facebook CEO Mark Zuckerberg stated that “already last quarter, we made changes to show fewer viral videos to make sure people’s time is well spent. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day.” Our belief is that this is not an immediate concern as ad revenue per user (see paragraph immediately above) remains strong.
Earlier this week the company announced that it was banning ads for “binary options, initial coin offerings and cryptocurrency.” Be careful bitcoin investors.
We felt it necessary to go into depth regarding Facebook for a number of reasons. Specifically as of the writing of this column we hold more than 58,000 shares of the company for the benefit of our clients. We also have read some research reports lately suggesting that it is time to sell the stock. Other than trimming around the periphery and unless at some point in the future the fundamentals suggest otherwise, we believe Facebook is a stock you can hold for the longterm. Marry Facebook – don’t date it.
Three titans of the financial world, CEOs Jamie Dimon of JP Morgan, Jeff Bezos of Amazon and Warren Buffett of Berkshire Hathaway announced that they were pooling resources of their respective companies in an effort to slow the rising cost of health care in the United States. As part of a joint press release Buffett noted that “the ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs with concurrently enhancing patient satisfaction and outcomes.”
Continue to invest in, but beware of health care as this new not-for-profit venture certainly adds to the level of risk when investing in industry. First on the firing line will most likely be managed care and pharmacy benefit managers. Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, please call 518279-1044.