Something nice happened for the Smart All Stars Portfolio last Thursday night (30 June).
Two stocks in the portfolio rose by over 10%, buoyed by positive results in their latest earnings report.
Let me talk about one of them, namely Meta Platforms (NASDAQ: META).
While last night’s share price jump was nice to have, this gain pales in comparison with the 100%-plus gains the stock has recorded overall for the portfolio.
There are some lessons here we want to share.
Buying when the chips are down
Back in early 2022, Meta Platforms couldn’t do anything right.
Facebook had lost a million daily active users.
As users fled from Facebook, TikTok was gaining prominence.
Meanwhile, Apple (NASDAQ: AAPL) tightened the noose by restricting Meta’s data access.
In turn, the social media giant estimated that it could face US$10 billion revenue headwind for 2022 due to these new restrictions.
To top it off, Meta put out a meek revenue forecast, expecting sales growth to slow to between 3% and 11% for 2022’s first quarter.
Subsequently, shares fell by over 20% in a single day.
So, here’s the thing: the portfolio first bought shares in January 2022 at US$323.25, just before the bad news hit.
Upon accessing the situation, the Smart All Stars Portfolio bought an even larger position at US$202.08.
Here’s what most people don’t tell you.
When the news is bad, there is no one around to tell you the good news.
You have to look for it yourself.
Building conviction over time
Personally, I have owned Meta shares since January 2016.
So, it wasn’t my first rodeo.
This was also not the first time the social media company has run into trouble.
Here’s what I have learnt: you have to be willing to look past the dark clouds to find the truth.
Slowly but surely, the positive news appeared.
In 1Q’22, Meta said that its “click-to-message” ads, its workaround to Apple’s restrictions, had become a multi-billion dollar business.
By the turn of the year, this revenue stream had ballooned to a US$10 billion run-rate business.
An impressive achievement, no less.
But did we hear from the financial media on these positive developments?
Nope, there were crickets.
And the social media giant was just getting started.
In 2Q’23, Reels ad revenue — Meta’s answer to TikTok — soared from virtually nothing to a US$10 billion revenue run-rate.
A quarter later, Advantage+ Shopping, Meta’s AI-powered solution, racked up another US$10 billion in annualised sales.
By the end of 2024, a year later, the solution doubled its revenue run-rate to US$20 billion.
Shares had recovered.
Surely, the financial media would pick up on the positive business momentum.
But nope, the positive news never made the headlines.
Buying when the chips are up
Here’s another thing to know: despite the share price recovery, the portfolio continued to accumulate more shares throughout 2023 and 2024.
But why buy when the stock price was rising?
Simply said, the Smart All Stars Portfolio recognised that the three revenue streams above were not one-quarter wonders.
In all likelihood, these solutions were going to help further boost Meta’s topline growth for some time to come.
Furthermore, shares were not exactly expensive.
In fact, when asked during a CNA Money Mind segment back in July 2024, I suggested Meta as a stock to watch.
The stock was trading at US$487 back then.
Given the share price had run up from its low, the crowd’s reaction was expected.
The naysayers even suggested that if the stock is in the mainstream news, it’s already too late.
Well, here’s the score …
Meta’s stock price just crossed US$770 on Friday, proving that the only thing holding you back is making decisions based on the stock price alone.
Get Smart: The best stock to own
Peter Lynch once said that the best stock to buy is the one you already own.
He makes a good point.
Here’s what you don’t want to miss: if you stick with a business through thick and thin, you’ll come to understand what it takes for a company to turn itself around, and subsequently, prosper.
This is knowledge that those who have sold early will not experience.
It’s through this accumulated mileage that you learn how to make better judgments throughout the lifetime of the business — both when it is doing well, and when it is not.
And you know what’s the best part?
Everything I have shared with you above on Meta’s business is public knowledge.
But if that is so, why didn’t the naysayers pick up on its growing business momentum?
Most of the sellers never come back, and have given up on a stock when it fell.
Simply said, you need to pay attention to notice the changes.
And we were glad we did.
If you’ve ever asked, “But what do I do with this info?” – read Get Smart, our weekly newsletter. It helps you connect the dots, so you understand what the stories mean for your portfolio. Join thousands of investors who rely on it for steady, grounded investing ideas. Subscribe now and sharpen your insight for free.
Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses!
Disclosure: Chin Hui Leong owns shares of Apple and Meta Platforms.
