Home » Business

Why Empire Financial Research Continues To Recommend Facebook Stock?

Published on

Whitney Tilson’s email to investors discussing why do we continue to recommend Facebook Inc (NASDAQ:FB) stock?; New York passes sweeping bills to improve conditions for delivery workers.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 2021 hedge fund letters, conferences and more

Why Do We Continue To Recommend Facebook Stock?

1) I've been very critical of some of Facebook (NASDAQ:FB)'s business practices in recent e-mails, which led two readers to ask:

  • "Hi Whitney. You've written several e-mails outlining the awful business practices of Facebook, but you continue to rate it as a buy in one of your portfolios. Why?" – Jim S.
  • "Hi Whitney, Thanks for today's post regarding Facebook. Just curious, have your thoughts changed on FB as an investment? We are Empire Elite Partners and have been invested in Facebook since it was part of your perfect portfolio." – Lisa T.

The short answer is that I'm able to hold two seemingly contradictory thoughts in my head at the same time: a company may be behaving badly, yet its stock might be undervalued.

In fact, this is often the case, especially if you're a value-oriented investor like me. We look for beaten down, out-of-favor stocks – which sometimes is the result of some taint. But as legendary investor Bill Miller once noted: "If it's in the headlines, it's in the stock price." And if the problems prove to be fixable, the stock can soar.

One of my best investments ever was buying McDonald's (NYSE:MCD) in late 2002 and early 2003 from $16 per share down to $12.50 per share as the company weathered criticism that its food was unhealthy and was contributing to the obesity epidemic.

I also made a quick profit in mid-2010 when I bought oil giant BP's (BP) stock in the wake of the Deepwater Horizon oil spill in the Gulf of Mexico.

Here at Empire Financial Research, our most important job is to give our subscribers money-making stock ideas. Thus, we haven't hesitated to recommend controversial companies such as gunmaker Smith & Wesson Brands (NASDAQ:SWBI), cigarette company Altria (NYSE:MO), defense contractor General Dynamics (NYSE:GD), spirits maker Diageo (NYSE:DEO), pot stock Green Thumb Industries (OTCMKTS:GTBIF), and gambling companies Penn National Gaming (NASDAQ:PENN), Las Vegas Sands (NYSE:LVS), DraftKings (NASDAQ:DKNG), and Flutter Entertainment (LON:FLTR).

New York Passes Sweeping Bills to Improve Conditions for Delivery Workers

2) Speaking of companies behaving badly, in Tuesday's e-mail I shared an article – Revolt of the Delivery Workers – about the horrific work conditions these men suffer, so I was glad to see this: New York Passes Sweeping Bills to Improve Conditions for Delivery Workers. Excerpt:

Since the beginning of the pandemic, food delivery workers on bikes have become even more ubiquitous features of the New York City streetscape, earning low wages and often braving horrendous weather, hazardous streets and the threat of robbery to bring people their takeout orders at all hours of the day.

On Thursday, the city became the first in the nation to take aggressive steps to improve those employees' working conditions, approving a groundbreaking package of legislation that will set minimum pay and address the plight of couriers employed by app-based food delivery services like Grubhub, DoorDash (DASH), and Uber Eats (UBER).

The working conditions are no doubt similar across the country (and world), so the solution isn't to wait for each city to enact these basic reforms, but rather for the companies themselves to embrace them.

If one of them were to do so, perhaps customers would reward it by shifting their business, which would compel the others to follow.

Best regards,

Whitney

P.S. I welcome your feedback at [email protected].