Why Facebook stock drop is just a 'hiccup'

Portfolio manager Reg Jackson explains his strategy in the tech stocks space

Why Facebook stock drop is just a 'hiccup'
Initial worry at Facebook’s share price drop on Friday eased yesterday as the implications of its move away from news to more “meaningful social interactions” became clear.

Shares in the social media giant dropped 4.5% after co-founder Mark Zuckerberg’s announcement, which predicted users would spend less time on the site, but they were up nearly 1% yesterday as Needham reaffirmed its buy rating and analysts concluded the company could actually benefit long term.

Among those following the story was Reg Jackson, co-CEO and vice president at JMRD Wealth Management, who said the headlines should not affect investors’ long-term plan.

He said: “We do own Facebook in our basket and plan on continuing to hold for now but are monitoring the situation based on the new developments.”

He added that last week’s move, interpreted as Facebook’s attempt to counter “fake news”, was more of an excuse for investors to take some profits.

“The way we would have looked at that news, let’s call it opportunistic – not panic because that’s the wrong word – but it provided a good excuse for people to sell. With that particular story, we don’t think the long-term narrative has changed at all.

“You still need to watch it in case it escalates but the stock was down 4% or something; in our world that’s not a disaster. It’s a hiccup but [just] follow the story.”

The so-called FAANG companies - Facebook, Amazon, Apple, Netflix, and Alphabet (Google) - remain strong performers, according to Jackson, who says his clients have earned solid returns from technology firms in the past few years and that the stocks have almost turned into a “must-own category”.

He said tech stocks were in his JMRD US Growth Basket that posted a return of just over 36% in 2017 and that the firm continues to max out its allowable technology weighting of 40%. He expects “positive returns for equity markets in 2018 and that would include a strong showing for technology”.

He said: “The bottom line is we like these companies and we certainly like technology.”

Jackson said he was also surprised at how strong the NASDAQ has been out of the gate in the new year.

“It’s already up 5%, year to date and it’s only been two weeks,” he said. “So again, so far, we are monitoring things. Now it’s up to earnings. Will we continue to see earnings continue to support technology valuation? The momentum looks good, earnings look good, tax reform is certainly positive, repatriation is positive; so again the things that attract us to technology over the past number of years are still in place. But we are monitoring on a regular basis.”

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