[melling]

Perhaps listening to Warren Buffett explaining how companies are businesses, and how you are buying part of the company will help explain the difference.

For example, when Meta P/E was 9, people should have said to themselves “hey, that’s an incredible opportunity”, rather than waste all that time hating on the company.

Crypto could recover if enough people “believe“ but there’s no real business

[nocoiner]

Why is that an incredible investment opportunity? Something like ~53% of the voting power is owned or controlled by Zuck, and there’s no indication that he has any plans to meaningfully return money to shareholders,* rather than continuing to write ten-digit company checks every month to fund the metaverse.

If you want to buy META as a bet on Zuck himself or the success of their conception of the metaverse, that’s one thing, but I don’t see how this is a reasonable value investment based on their current management and capital structure.

* I know Meta has done stock buy-backs from time to time, which are of course economically equivalent to a dividend (except more tax efficient), but from eyeballing their history of repurchases, it looks like they, like many issuers, managed to set billions of dollars of shareholder money on fire by repurchasing the stock while it was trading at rich multiples.

[ianai]

Stock buybacks aren't equivalent to dividends if the stock subsequently loses that value. Then it's much worse than a dividend.

[djbebs]

The peoblem with meta was never the quality of the business. It was with your ability to extract value and control from it.

The reason meta is uninvestible is because they are a clear cut case of structurely unsound corporate governance.

[melling]

Different opinions. That’s what makes a market. You saw one thing and I focused on other aspects.

We don’t need to convince each other. The market will tell us who is right.

[thunky]

> For example, when Meta P/E was 9

Is there something special about the number 9?

Wondering why you waited to buy at 9 but 10 was no good.

[prewett]

9 is the recent low, but presumably GP would consider 10 to be a good deal, too. Typically companies with a solid future making a reasonable profit are about 20 - 30; historically META is about in this range. If META still has "normal" prospects, then it is pretty undervalued.

However, this is not a Buffett view on things, as he evaluates based on intrinsic value rather than P/E. He also avoids tech companies because it's hard to figure out what their intrinsic value is. KO (Coca-Cola) for example, is going to grow about as much as GDP, it has a long history of 30% net profit, it has a huge moat so the dynamics of the company aren't likely to change. Thus one can actually attempt to evaluate its intrinsic value: what would you pay for a bond that earned 30% every year? Do the present value calculation and there you go. But what is META's prospects 10, 20, 30 years from now? Hard to say, and the social media landscape keeps changing. So Buffett would not invest in META--a P/E of 9 might be a steal, but it might also be an indication that the prospects of the company are no longer so positive as they were two years ago.

(AAPL is a notable exception to Buffett not investing in tech, because of how their products reinforce each other to create a large moat. At this point I think it is also fairly likely that Apple will be around making computers for the foreseeable future--even OS 9 didn't kill them off, and now they have market leading hardware and a solid OS and compelling ecosystem. In this way of thinking, one could argue they have similar dynamics as KO, but with the advantage that they have growth prospects. They also are returning 30% to shareholders, mostly in the form of huge stock buybacks. Hence Buffett has been a massive buyer of AAPL recently.)

[thunky]

> a P/E of 9 might be a steal, but it might also be an indication that the prospects of the company are no longer so positive as they were two years ago

This is the key point right here.

Just looking at stats alone isn't enough to know that you're seeing "an incredible opportunity".

[melling]

I don’t have a magic formula and I’m often wrong. Meta dropped 20% in one day and I saw an opportunity.

https://www.bbc.com/news/business-63406803.amp

The stock did continue lower and I certainly didn’t get the bottom.

All I’m saying is take the emotion out of it and try to be open minded. Hating on a company has little value. At P/E of 9 there’s a safer margin

Also, I didn’t say Buffett would buy META. He’s not really a tech investor.

[thunky]

> take the emotion out of it

It doesn't sound like you did that, though. You responded to a drop in share price rather than fundamentals.

As you just said, it really had less to do with the number 9 and more to do with the number 20.

But if you thought Meta was a good investment at PE 10 or higher, I'm not sure why you wouldn't have already owned it.

Now that the PE is back above 10, does that mean you're selling it?

[HWR_14]

> when Meta P/E was 9, people should have said to themselves “hey, that’s an incredible opportunity”

AFAIK, Meta doesn't pay dividends. So Buffet (or Gates, who is Buffet but likes tech) would steer clear.

[melling]

That’s an incorrect statement.

Buffett doesn’t buy companies because of dividends. In fact, he’s not a fan of them.

https://www.investopedia.com/ask/answers/021615/why-doesnt-b...

[bionsystem]

Why are you looking at trailing PE ? You are buying future profits, not past ones. (And btw, Zuck has already told his shareholders that he has no near-term plan for the profitability of his investments.)

[AmericanOP]

People arent betting against facebook’s p/e today, they are betting against it tomorrow.

If you remain convinced facebook is a utility, good job to someone.

[itsoktocry]

If the E goes down substantially, is it an incredible opportunity?