Facebook owner Meta Platforms (NASDAQ: FB) surprised the stock market on Wednesday 2 February with a bigger decline in profits than analysts had expected. And the outlook statement was downbeat. The company said revenue growth will slow because users were spending less time on the firm’s more-profitable services.
Massive loss of market capitalisation
The revelation caused Meta stock to plunge. And at $238 yesterday, the stock was down more than 25% in just one day. That’s a big move for such a mega-cap company. The market capitalisation was reduced by more than $200m. And according to analyst Graham Neary, that’s the biggest one-session loss of capitalisation suffered by any company in history.
As I write, Meta Platform’s market cap is about $660m. And that means Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) is now valued higher by the market with a capitalisation of around $706m. The only companies valued more highly than Berkshire now are Apple, Microsoft, Google owner Alphabet, Amazon and Tesla Motors.
Warren Buffett is rising up the rankings, and rightfully so. The way Buffett has guided the conglomerate to earn annualised returns of 20% since 1964 is nothing short of amazing. It’s the consistency of growth that’s so impressive. And the master investor has done it with a diverse range of businesses and stocks covering several sectors.
I think the widespread nature of his investments makes Berkshire Hathaway stand apart from the other seven mega-caps mentioned. Each of those businesses was built on a narrower focus and operations mainly in just one sector. I’d describe those companies as being driven by entrepreneurial forces, whereas Berkshire has been powered by Buffett’s flair and skill as an investor.
I’d follow Warren Buffett
But is the plunging Meta Platform’s stock price a buying opportunity? The stock could bounce higher again, but it’s not for me. I think there’s a risk that social media platforms could be shunned by investors in the years ahead because of the addictive nature of the services provided to consumers. And I’m also mindful of the many platforms that have risen in popularity only to plunge back down again. For example, it wasn’t so long back that Myspace was hot.
On top of that, I was sceptical when Facebook changed its name to Meta Platforms. It seemed to me the company might already have seen the writing on the wall and was perhaps acting to find new markets to preserve revenue. However, the idea that some alternative reality may catch on baffled me. I like real life, thank you very much!
I’d be much more inclined to look for opportunities to buy shares in Berkshire Hathaway, such as dips, down-days, corrections and bear markets. But I’m even keener on applying Buffett’s well-documented stock-picking methods to choosing my own shares for a portfolio.
There are no guarantees of a positive investment outcome because all shares carry risks, as we’ve seen with Meta Platforms. However, I think a few well-chosen stocks would work well in my portfolio alongside a selection of index tracker funds. And I’d choose my stocks from both the UK and North American stock markets.