January 31, 2024 • 21 mins
Discover the intricate workings of a social media colossus as Clem Miller joins us to dissect Meta Platforms, the company soaring past a $1 trillion market cap. Our conversation takes you behind the scenes of Facebook, Instagram, and WhatsApp, revealing how these household names translate likes and shares into a torrent of advertising revenue. As election year fervor mounts and events like the Olympics are set to spike ad spending, we scrutinize Meta's position amidst this bustling marketplace and its adherence to new EU anti-disinformation laws—developments that could very well reshape their global operations, including in the US.
Venture with us into the futuristic foray of Meta's ambitious metaverse initiative and the burgeoning role of generative artificial intelligence in advertising. Clem and I critically evaluate how these bold moves could impact Meta's revenue trajectory in 2024. With the spotlight on Mark Zuckerberg's vision, we consider whether this tech giant can maintain its momentum or face a slowdown as it expands into virtual reality. Whether you've got skin in the game as an investor or you're simply captivated by the relentless evolution of digital platforms, tune in for an enlightening chat that's as much about the numbers as it is about the narrative shaping our digital landscape.
Straight Talk for All - Nonsense for None
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Steve Davenport (00:03):
Hello and welcome to Skeptics.
Guide to Investing.
This is Steve Davenport and I'mhere with Clem Miller and in
this episode we're going to talkabout Meta platforms, or one of
the so-called Magnificent 7.
Meta recently reached $1trillion, that's trillion with a
T market cap.
Clem and I think 99% of ouraudience knows what Meta does,
(00:29):
but for those 1% who don't, canyou briefly describe the
business?
Clem Miller (00:35):
Sure, so Meta is a social media and communications
company.
It has three major products,which many of you know about
Facebook that was their initialproduct Instagram and WhatsApp.
So those are their three majorproduct lines.
(00:59):
So, how do they make money, Clem?
So they make money offadvertising.
It's really that simple.
I recall in a famousconversation Mark Zuckerberg,
the leader of Meta, wastestifying to the US Senate and
(01:21):
Senator Orrin Hatch asked a very.
He was confused, let's say,about what Meta does, and so he
asked a question well, MrZuckerberg, how does Meta make
money?
And Mark Zuckerberg, withoutlaughing too much, said well,
(01:42):
sir, we advertise, we selladvertising.
I thought that was funny whenhe said that.
Steve Davenport (01:53):
Yeah, well, it was also advertising that it
does for political candidatesand how it helps those political
candidates can sometimes bewhat was implied in that
question Is it Clem?
Clem Miller (02:06):
Oh, I would certainly say so, and there's a
lot of concern.
Steve Davenport (02:12):
I'm not defending Congressmen asking
stupid questions.
Believe me.
Clem Miller (02:18):
You know there's a lot of concern in political
circles about how social mediawhether it's ex, formerly,
twitter or Facebook or you knowany TikTok more recently to the
degree to which these companies,these social media companies,
(02:42):
are able to influence politicalelections, and not just you know
what somebody wants, right?
So I would, you know, I thinkthat there is some concern.
These are legitimate concernsand have led, in the case of the
EU, to actual legislation totry to rein in some of the
(03:04):
excesses of these companies, andso far at least, you know,
there's been some cooperationfrom the social media companies
with the EU.
But that's its early days, andthere's an interesting question
that arises from that, which ishow does a company like Metta
(03:27):
adhere to some of theseanti-disinformation laws coming
out of Europe without at thesame time violating the First
Amendment?
And it could, be like in somany other things, that EU
legislation actually drivesglobal behavior, and so you
(03:49):
might actually have Meta sort ofchanging some of its policies
in the US in terms of, you know,allowing their platform to be
misused.
Steve Davenport (04:02):
So growing revenue at a fast rate is always
a challenge for companies,especially when they get so
large right and they have hugerevenues.
Do you think Meta will have agood 2024 revenue, wise now that
it's an election year?
Clem Miller (04:17):
Well, you stole the thunder from me, Steve.
I was going to mention that,that you know they're going to
do very well this election year.
And not only that, but you'vegot the Olympics this year as
well, and so that's going to behelpful for advertising.
If you look at what theexpectations are among analysts,
(04:39):
they're actually for their forabout nine to ten percent
revenue growth for 2024, whichis which is pretty strong when
you consider how big meta isalready.
But also that's actually downthat, but not that.
Nine to ten percent is actuallydown from the seventeen percent
(05:02):
annualized trailing annualizedover the last three years and
twenty percent Trailingannualized over the last five
years.
So the revenue growth iscontinuing at a nice pace but,
you know, is indeed decelerating.
Steve Davenport (05:20):
Well, I think at the size of that.
I mean, I don't know howAdvertising revenues and you
know, does it very much based onthe continent or the, the size
of the economy, or are theyfinding that they can make more
money in advertising in areasthat might not have as good a
media?
Clem Miller (05:41):
Well, I think one of the things that they're
they're doing now to try toleverage their activity is, as
so many other companies aredoing, is using generative
artificial intelligence, and sothey're starting to use that In
terms of their advertisingtargeting nice.
Steve Davenport (06:02):
I believe many of us have heard of Mark
Zuckerberg's enthusiasmregarding creating virtual
reality devices, (VR).
Zuck called this a metaverse,even in the company, from
Facebook to Meta to reflect hisnew emphasis, the so-called
metaverse one a thousandthematic investment Commentaries
(06:25):
.
However, by late 2022, Zuck hasdialed back his enthusiasm.
You could barely hear a peepabout the metaverse.
Why did Zuck shift course soquickly?
Clem Miller (06:40):
It had to do with investors not believing in the
metaverse.
So what?
What Meta did?
What Zuckerberg did is hepumped billions of dollars into
the reality labs division, metas reality labs division and, as
it became clear that itwouldn't generate any real
(07:03):
commercialized products anytimesoon, he would then start
talking about how it could bethree years, five years, ten
years, before any realcommercialization happened.
That kind of freaked outinvestors who want an earlier
return on larger investments,and so they investors penalized
(07:27):
Metta for that.
The stock price basicallycollapsed in 2023.
I'm sorry, 2022 the stockmarket collapsed.
Given this, this emphasis onMeta, I think many investors
actually thought meta was kindof a Zuckerberg vanity project,
kind of like what you see withwith Elon, elon Musk and his
(07:52):
various endeavors.
So, and so they, you know, theyput they, they penalized, they
penalized Zuckerberg and meta.
However, over the last okay, sothat's changed around in 2023
and basically Metta embarked onits so-called year of efficiency
(08:17):
.
So lots of workers were laidoff in 2023.
And actually that's helpedMetta, the fact that they
decided to shift course andbecome more efficient.
Over the last 12 months throughJanuary 30th, Meta's share
(08:39):
price has increased by 172%.
Yeah, you heard that right 172%.
So that's investors looking atthese efficiency initiatives and
thinking, wow, on the basis, onthe back of this strong revenue
growth and earnings andoperating efficiency
(09:00):
improvements, we expect Meta todo really great over the next
few years.
Steve Davenport (09:08):
So I'm not going to take apart what
Zuckerberg says, because he's alot smarter than I am, because
he has a lot more money.
But efficiency couldn't he havehis workers do things
differently or work in otherareas vs laying people off.
The solution for everybody whowants to have an operation
(09:29):
that's more efficient, Clem,Because that seems to me to be
the easy choice versus the hardchoice of actually focusing on
the effort in the right areas.
Clem Miller (09:41):
I think you're right.
I think that we're dealing herewith Silicon Valley, and
Silicon Valley has, I think, adifferent ethic when it comes to
employment.
Companies, there are morelayoffs.
There's more what we'll call.
(10:03):
There's a famous economistnamed Shumpeter who talked about
creative destruction.
I think that's a great way oftalking about Silicon Valley.
You have companies that layoffpeople.
You have companies that go outof business, but the individuals
who are involved, who havegreat engineering skills,
(10:24):
scientific skills, they'repicked up by other companies.
So it's a question of creativedestruction.
Steve Davenport (10:33):
So you think that Zuckerberg is trying to
release that talent to otherpeople to help the industry
overall?
Clem Miller (10:38):
No, I don't think they're trying to help other
industries.
I think what they're doing isthey're saying in order to
satisfy shareholders whichinclude me, by the way who needs
to be satisfied in order tosatisfy shareholders, what he's
doing is he's creating a leaner,meaner company in order to do
(11:02):
that, in order to boost up hisshare price.
Steve Davenport (11:05):
All companies.
The shareholder price is theonly thing that we need to focus
on Clem.
Oher stakeholders like thecommunity ,t he environment and
other things get some attentionfrom corporations.
Clem Miller (11:19):
Well, now we're getting into the whole ESG area.
We've done a podcast on thatand I'm sure we'll do future
podcasts on that.
Is it shareholders who are thekey audience, or is it
stakeholders beyond shareholderswho are the key audience?
I understand.
Steve Davenport (11:39):
I like them to keep you happy.
Clem, because that's something.
I also just wonder sometimeswhether, reacting by laying off
people because that's what ananalyst recommend, it seems to
me that might not always be thequid pro quo you want to engage
in.
Clem Miller (12:00):
Well, one of the things that I wanted to talk
about was the glass door ratingfor Meta.
Meta has a 3.9 glass doorrating.
Some of the other techcompanies in Silicon Valley and
beyond have ratings of 4.0, 4.2,4.3.
(12:23):
So clearly, meta's glass doorrating, which measures employee
satisfaction, have beendiminished by these layoffs, and
so one can take that intoeffect and say well as a quality
proxy and say well, there'ssome dissatisfaction with this
(12:45):
process.
But overall, what publiclytraded companies try to do is
they try to satisfy theirshareholders.
Steve Davenport (12:55):
No, I'm saying that I need to satisfy
shareholders.
It's where I'm just askingwhether it's.
You know, there might be somequestion as to whether sometimes
Zuckerberg you know he likes toengage in these things until
there's a point at which he getssome feedback that affects his
share price.
That that's what motivates him,so I'm fully aware.
(13:17):
What do you think aboutprofitability and free cash flow
for these looking at Meta.
Clem Miller (13:27):
So, yeah, this is a really strong company,
profitability wise.
So net interest margin that's,the net profit divided by
revenues is 23%, and free cashflow is also 23%.
So free cash flow is the amountof cash generated by a company
(13:52):
that's available foracquisitions, that's available
for buying back shares and isavailable for dividends.
Now, Meta does not paydividends yet, but it does buy
back a lot of its own stock, andwhen a company buys back stock,
each you know each remainingshare of stock is worth more,
(14:17):
and so you know that's a great.
Steve Davenport (14:19):
You know there's also issuance to
management, right?
So it's really the net ofissuance to management minus
buyback.
That's correct and change thetotal.
So I know that they're tryingto help the, but there's a
there's an employee aspect tothis too, right, and management
aspect right, it's more of a netbuyback as opposed to a gross
(14:39):
buyback.
So, metaverse being challengingTikTok and Google's YouTube
shorts with its Reel product,it's also challenging Elon
Musk's X with its Threadsproduct.
Given Metaverse experience, doyou think it's a bit of a reach
to make any conclusion aboutreels or threads, or is it clear
(15:03):
that that was a good move?
Clem Miller (15:05):
Well, I'd say it's definitely too early, it's not.
It's not a gimmick.
I call it a gimmick, like theMetaverse, because you already
have products out there that areselling, namely X and YouTube
shorts and TikTok.
But those are very wellestablished products TikTok,
(15:33):
youtube shorts and X you knowthe Twitter product.
So it's going to be hard forZuck to be able to penetrate
those markets and do well.
So, yeah, I am skeptical aboutthe ability of Meta to break
(15:53):
into those established markets.
Steve Davenport (15:56):
The one complaint about the tech stocks
tends to be that they'reexpensive.
How does it look on valuation?
Clem Miller (16:06):
Pretty good.
On a forward price to earningsratio, they're at 28%, which 28
times sorry, 28 times forward PE.
That's not expensive as far asa tech-related company is
concerned.
Steve Davenport (16:27):
Not 23% Using the PEG ratio that's pretty.
Clem Miller (16:32):
Yeah, I was going to say the PEG ratio is only 1.4
times on a forward basis.
That indicates that it's prettycheap too, but that's because
you've got expected rapid growthstill.
Yeah it's not that expensive.
Steve Davenport (16:51):
I know you look at short-seller interest when
you're thinking about thesenames.
How does Meta do on thisshort-seller interest?
Clem Miller (17:01):
Pretty good.
It has a short-interest ratioof 1.22%.
Basically, what this means isthat short sellers who expect a
stock to go down really haven'tshown much interest in looking
(17:21):
at Meta as a stock that theymight want to attack.
Some of the stocks that are outthere that they might want to
attack have short-interestratios of 5%, 7%, 10%.
When you remember what happenedwith those banks on the West
Coast last year, they hadshort-seller ratios before the
(17:42):
crises of 10%, 15%, 20%.
Just crazy.
1.22% is pretty attractive.
Steve Davenport (17:53):
We have a question in the mailbag and
we've talked about it here, butdo either or both of you invest
in Meta?
Can you tell us what portion ofyour portfolio you hold in the
stock?
I'll go first and say that wedo hold Meta in our growth
portfolio.
The growth portfolio isbenchmarked against the S&P
(18:14):
growth and that has a largepercentage in technology, our
core portfolio, which has asmaller percentage in technology
.
We sold basework for Meta butwe kept it in our growth
portfolio because that has ahigher percentage.
When you think about, if I haveto only pick 12 names and they
(18:36):
reach 2% or 2.5%, it doesn'tmake the cut in the top 12, but
if I pick 16, 17 for the growthportfolio, it does make the cut.
I would say that we aresomewhat positive.
But we also have some questionsabout whether regulation and
(18:56):
other items could start to be achallenge as Congress starts to
imitate Europe and start to beconcerned about some of the
privacy and other issues withthe stock.
What about you?
Clem Miller (19:08):
Clem, I have about 2.5% right now in Meta of my
portfolio.
I have larger proportions inMicrosoft and in Alphabet, which
is Google.
I have sold off my Appleposition recently, just by
(19:30):
comparison, and I have neverowned Tesla because I have
issues which we talked about ina prior podcast.
I have a position overall.
Despite some of the issues thatwe have talked about on the
regulatory front.
(19:51):
I do see Meta as being able tohandle those issues.
I do have that significantposition there.
This is my portfolio.
I have a lot of positions in it, not just a growth portfolio.
I have a lot of what you wouldcall value stocks in here, in a
(20:17):
sense, 28% forward PE, 1.4%forward peg not necessarily
purely a growth stock, as someother stocks might be.
Steve Davenport (20:33):
Well, I think that's a great analysis, Clem,
and I appreciate all yourinsights.
Thank you to all our listenersfor checking in with us.
If you enjoyed this podcast orany of our other podcasts,
please like, share and subscribe.
Thanks a lot and look forwardto talking to you again.
Clem Miller (20:54):
Thanks, Steve.
Hello and welcome to Skeptics.
Guide to Investing.
This is Steve Davenport and I'mhere with Clem Miller and in
this episode we're going to talkabout Meta platforms, or one of
the so-called Magnificent 7.
Meta recently reached $1trillion, that's trillion with a
T market cap.
Clem and I think 99% of ouraudience knows what Meta does,
(00:29):
but for those 1% who don't, canyou briefly describe the
business?
Clem Miller (00:35):
Sure, so Meta is a social media and communications
company.
It has three major products,which many of you know about
Facebook that was their initialproduct Instagram and WhatsApp.
So those are their three majorproduct lines.
(00:59):
So, how do they make money, Clem?
So they make money offadvertising.
It's really that simple.
I recall in a famousconversation Mark Zuckerberg,
the leader of Meta, wastestifying to the US Senate and
(01:21):
Senator Orrin Hatch asked a very.
He was confused, let's say,about what Meta does, and so he
asked a question well, MrZuckerberg, how does Meta make
money?
And Mark Zuckerberg, withoutlaughing too much, said well,
(01:42):
sir, we advertise, we selladvertising.
I thought that was funny whenhe said that.
Steve Davenport (01:53):
Yeah, well, it was also advertising that it
does for political candidatesand how it helps those political
candidates can sometimes bewhat was implied in that
question Is it Clem?
Clem Miller (02:06):
Oh, I would certainly say so, and there's a
lot of concern.
Steve Davenport (02:12):
I'm not defending Congressmen asking
stupid questions.
Believe me.
Clem Miller (02:18):
You know there's a lot of concern in political
circles about how social mediawhether it's ex, formerly,
twitter or Facebook or you knowany TikTok more recently to the
degree to which these companies,these social media companies,
(02:42):
are able to influence politicalelections, and not just you know
what somebody wants, right?
So I would, you know, I thinkthat there is some concern.
These are legitimate concernsand have led, in the case of the
EU, to actual legislation totry to rein in some of the
(03:04):
excesses of these companies, andso far at least, you know,
there's been some cooperationfrom the social media companies
with the EU.
But that's its early days, andthere's an interesting question
that arises from that, which ishow does a company like Metta
(03:27):
adhere to some of theseanti-disinformation laws coming
out of Europe without at thesame time violating the First
Amendment?
And it could, be like in somany other things, that EU
legislation actually drivesglobal behavior, and so you
(03:49):
might actually have Meta sort ofchanging some of its policies
in the US in terms of, you know,allowing their platform to be
misused.
Steve Davenport (04:02):
So growing revenue at a fast rate is always
a challenge for companies,especially when they get so
large right and they have hugerevenues.
Do you think Meta will have agood 2024 revenue, wise now that
it's an election year?
Clem Miller (04:17):
Well, you stole the thunder from me, Steve.
I was going to mention that,that you know they're going to
do very well this election year.
And not only that, but you'vegot the Olympics this year as
well, and so that's going to behelpful for advertising.
If you look at what theexpectations are among analysts,
(04:39):
they're actually for their forabout nine to ten percent
revenue growth for 2024, whichis which is pretty strong when
you consider how big meta isalready.
But also that's actually downthat, but not that.
Nine to ten percent is actuallydown from the seventeen percent
(05:02):
annualized trailing annualizedover the last three years and
twenty percent Trailingannualized over the last five
years.
So the revenue growth iscontinuing at a nice pace but,
you know, is indeed decelerating.
Steve Davenport (05:20):
Well, I think at the size of that.
I mean, I don't know howAdvertising revenues and you
know, does it very much based onthe continent or the, the size
of the economy, or are theyfinding that they can make more
money in advertising in areasthat might not have as good a
media?
Clem Miller (05:41):
Well, I think one of the things that they're
they're doing now to try toleverage their activity is, as
so many other companies aredoing, is using generative
artificial intelligence, and sothey're starting to use that In
terms of their advertisingtargeting nice.
Steve Davenport (06:02):
I believe many of us have heard of Mark
Zuckerberg's enthusiasmregarding creating virtual
reality devices, (VR).
Zuck called this a metaverse,even in the company, from
Facebook to Meta to reflect hisnew emphasis, the so-called
metaverse one a thousandthematic investment Commentaries
(06:25):
.
However, by late 2022, Zuck hasdialed back his enthusiasm.
You could barely hear a peepabout the metaverse.
Why did Zuck shift course soquickly?
Clem Miller (06:40):
It had to do with investors not believing in the
metaverse.
So what?
What Meta did?
What Zuckerberg did is hepumped billions of dollars into
the reality labs division, metas reality labs division and, as
it became clear that itwouldn't generate any real
(07:03):
commercialized products anytimesoon, he would then start
talking about how it could bethree years, five years, ten
years, before any realcommercialization happened.
That kind of freaked outinvestors who want an earlier
return on larger investments,and so they investors penalized
(07:27):
Metta for that.
The stock price basicallycollapsed in 2023.
I'm sorry, 2022 the stockmarket collapsed.
Given this, this emphasis onMeta, I think many investors
actually thought meta was kindof a Zuckerberg vanity project,
kind of like what you see withwith Elon, elon Musk and his
(07:52):
various endeavors.
So, and so they, you know, theyput they, they penalized, they
penalized Zuckerberg and meta.
However, over the last okay, sothat's changed around in 2023
and basically Metta embarked onits so-called year of efficiency
(08:17):
.
So lots of workers were laidoff in 2023.
And actually that's helpedMetta, the fact that they
decided to shift course andbecome more efficient.
Over the last 12 months throughJanuary 30th, Meta's share
(08:39):
price has increased by 172%.
Yeah, you heard that right 172%.
So that's investors looking atthese efficiency initiatives and
thinking, wow, on the basis, onthe back of this strong revenue
growth and earnings andoperating efficiency
(09:00):
improvements, we expect Meta todo really great over the next
few years.
Steve Davenport (09:08):
So I'm not going to take apart what
Zuckerberg says, because he's alot smarter than I am, because
he has a lot more money.
But efficiency couldn't he havehis workers do things
differently or work in otherareas vs laying people off.
The solution for everybody whowants to have an operation
(09:29):
that's more efficient, Clem,Because that seems to me to be
the easy choice versus the hardchoice of actually focusing on
the effort in the right areas.
Clem Miller (09:41):
I think you're right.
I think that we're dealing herewith Silicon Valley, and
Silicon Valley has, I think, adifferent ethic when it comes to
employment.
Companies, there are morelayoffs.
There's more what we'll call.
(10:03):
There's a famous economistnamed Shumpeter who talked about
creative destruction.
I think that's a great way oftalking about Silicon Valley.
You have companies that layoffpeople.
You have companies that go outof business, but the individuals
who are involved, who havegreat engineering skills,
(10:24):
scientific skills, they'repicked up by other companies.
So it's a question of creativedestruction.
Steve Davenport (10:33):
So you think that Zuckerberg is trying to
release that talent to otherpeople to help the industry
overall?
Clem Miller (10:38):
No, I don't think they're trying to help other
industries.
I think what they're doing isthey're saying in order to
satisfy shareholders whichinclude me, by the way who needs
to be satisfied in order tosatisfy shareholders, what he's
doing is he's creating a leaner,meaner company in order to do
(11:02):
that, in order to boost up hisshare price.
Steve Davenport (11:05):
All companies.
The shareholder price is theonly thing that we need to focus
on Clem.
Oher stakeholders like thecommunity ,t he environment and
other things get some attentionfrom corporations.
Clem Miller (11:19):
Well, now we're getting into the whole ESG area.
We've done a podcast on thatand I'm sure we'll do future
podcasts on that.
Is it shareholders who are thekey audience, or is it
stakeholders beyond shareholderswho are the key audience?
I understand.
Steve Davenport (11:39):
I like them to keep you happy.
Clem, because that's something.
I also just wonder sometimeswhether, reacting by laying off
people because that's what ananalyst recommend, it seems to
me that might not always be thequid pro quo you want to engage
in.
Clem Miller (12:00):
Well, one of the things that I wanted to talk
about was the glass door ratingfor Meta.
Meta has a 3.9 glass doorrating.
Some of the other techcompanies in Silicon Valley and
beyond have ratings of 4.0, 4.2,4.3.
(12:23):
So clearly, meta's glass doorrating, which measures employee
satisfaction, have beendiminished by these layoffs, and
so one can take that intoeffect and say well as a quality
proxy and say well, there'ssome dissatisfaction with this
(12:45):
process.
But overall, what publiclytraded companies try to do is
they try to satisfy theirshareholders.
Steve Davenport (12:55):
No, I'm saying that I need to satisfy
shareholders.
It's where I'm just askingwhether it's.
You know, there might be somequestion as to whether sometimes
Zuckerberg you know he likes toengage in these things until
there's a point at which he getssome feedback that affects his
share price.
That that's what motivates him,so I'm fully aware.
(13:17):
What do you think aboutprofitability and free cash flow
for these looking at Meta.
Clem Miller (13:27):
So, yeah, this is a really strong company,
profitability wise.
So net interest margin that's,the net profit divided by
revenues is 23%, and free cashflow is also 23%.
So free cash flow is the amountof cash generated by a company
(13:52):
that's available foracquisitions, that's available
for buying back shares and isavailable for dividends.
Now, Meta does not paydividends yet, but it does buy
back a lot of its own stock, andwhen a company buys back stock,
each you know each remainingshare of stock is worth more,
(14:17):
and so you know that's a great.
Steve Davenport (14:19):
You know there's also issuance to
management, right?
So it's really the net ofissuance to management minus
buyback.
That's correct and change thetotal.
So I know that they're tryingto help the, but there's a
there's an employee aspect tothis too, right, and management
aspect right, it's more of a netbuyback as opposed to a gross
(14:39):
buyback.
So, metaverse being challengingTikTok and Google's YouTube
shorts with its Reel product,it's also challenging Elon
Musk's X with its Threadsproduct.
Given Metaverse experience, doyou think it's a bit of a reach
to make any conclusion aboutreels or threads, or is it clear
(15:03):
that that was a good move?
Clem Miller (15:05):
Well, I'd say it's definitely too early, it's not.
It's not a gimmick.
I call it a gimmick, like theMetaverse, because you already
have products out there that areselling, namely X and YouTube
shorts and TikTok.
But those are very wellestablished products TikTok,
(15:33):
youtube shorts and X you knowthe Twitter product.
So it's going to be hard forZuck to be able to penetrate
those markets and do well.
So, yeah, I am skeptical aboutthe ability of Meta to break
(15:53):
into those established markets.
Steve Davenport (15:56):
The one complaint about the tech stocks
tends to be that they'reexpensive.
How does it look on valuation?
Clem Miller (16:06):
Pretty good.
On a forward price to earningsratio, they're at 28%, which 28
times sorry, 28 times forward PE.
That's not expensive as far asa tech-related company is
concerned.
Steve Davenport (16:27):
Not 23% Using the PEG ratio that's pretty.
Clem Miller (16:32):
Yeah, I was going to say the PEG ratio is only 1.4
times on a forward basis.
That indicates that it's prettycheap too, but that's because
you've got expected rapid growthstill.
Yeah it's not that expensive.
Steve Davenport (16:51):
I know you look at short-seller interest when
you're thinking about thesenames.
How does Meta do on thisshort-seller interest?
Clem Miller (17:01):
Pretty good.
It has a short-interest ratioof 1.22%.
Basically, what this means isthat short sellers who expect a
stock to go down really haven'tshown much interest in looking
(17:21):
at Meta as a stock that theymight want to attack.
Some of the stocks that are outthere that they might want to
attack have short-interestratios of 5%, 7%, 10%.
When you remember what happenedwith those banks on the West
Coast last year, they hadshort-seller ratios before the
(17:42):
crises of 10%, 15%, 20%.
Just crazy.
1.22% is pretty attractive.
Steve Davenport (17:53):
We have a question in the mailbag and
we've talked about it here, butdo either or both of you invest
in Meta?
Can you tell us what portion ofyour portfolio you hold in the
stock?
I'll go first and say that wedo hold Meta in our growth
portfolio.
The growth portfolio isbenchmarked against the S&P
(18:14):
growth and that has a largepercentage in technology, our
core portfolio, which has asmaller percentage in technology
.
We sold basework for Meta butwe kept it in our growth
portfolio because that has ahigher percentage.
When you think about, if I haveto only pick 12 names and they
(18:36):
reach 2% or 2.5%, it doesn'tmake the cut in the top 12, but
if I pick 16, 17 for the growthportfolio, it does make the cut.
I would say that we aresomewhat positive.
But we also have some questionsabout whether regulation and
(18:56):
other items could start to be achallenge as Congress starts to
imitate Europe and start to beconcerned about some of the
privacy and other issues withthe stock.
What about you?
Clem Miller (19:08):
Clem, I have about 2.5% right now in Meta of my
portfolio.
I have larger proportions inMicrosoft and in Alphabet, which
is Google.
I have sold off my Appleposition recently, just by
(19:30):
comparison, and I have neverowned Tesla because I have
issues which we talked about ina prior podcast.
I have a position overall.
Despite some of the issues thatwe have talked about on the
regulatory front.
(19:51):
I do see Meta as being able tohandle those issues.
I do have that significantposition there.
This is my portfolio.
I have a lot of positions in it, not just a growth portfolio.
I have a lot of what you wouldcall value stocks in here, in a
(20:17):
sense, 28% forward PE, 1.4%forward peg not necessarily
purely a growth stock, as someother stocks might be.
Steve Davenport (20:33):
Well, I think that's a great analysis, Clem,
and I appreciate all yourinsights.
Thank you to all our listenersfor checking in with us.
If you enjoyed this podcast orany of our other podcasts,
please like, share and subscribe.
Thanks a lot and look forwardto talking to you again.
Clem Miller (20:54):
Thanks, Steve.
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