Why I’m Watching Meta’s Crash
I don’t usually do non-portfolio stock analysis, but sometimes you gotta break the rules.
Meta (FB) plummeted more than 25% in a single day.
Now, FB is not in our portfolio. But it showcases one of our mega trends: the metaverse.
And Meta has so much conviction in the metaverse — it’s going all in.
You know, I believe the metaverse is going to be HUGE.
It represents a human opportunity (like me spending time with my mom in India anytime I want).
And an investment opportunity.
We have exposure to the metaverse across our services.
But if you want my opinion on whether Meta (FB) is a buy after its 25% drop … watch today’s Bold Profits Daily:
I don’t usually do individual stock analysis. However, sometimes you have to break the rules. This is a non-portfolio company, even though we’ve owned it in the Profits Unlimited portfolio before. Before I go on, for those of you who are looking at this, I cut myself while I was shaving.
That’s what this is. I just wanted to let you know so you could stop staring at it. Going back to what I was saying, normally I don’t do single stock analysis, but last week we had an event that was pretty big. We had a lot of stocks in our portfolio that got hit.
Facebook Got Destroyed!
It was a non-portfolio stock that got hit by such a huge amount and it was such a big company that it really made me pay attention. Even though I’m not going to recommend it in the Profits Unlimited portfolio, I want to spend a little time on it because it does represent a theme that we have represented in the portfolio.
That is the idea of the metaverse. The stock I am referring to is Facebook. If you own Facebook you would have seen it got destroyed. For a company that big — we’re talking hundreds of millions of dollars — to get cut by 25% in a day. I have to tell you that’s unthinkable.
If they were running statistically analysis they would tell you that’s a 10-sigma event, maybe even a 50-sigma event. In other words, it’s not supposed to happen. If you model this using statistical analysis this just does not happen. Companies this big should have willing buyers who are willing to step in at 5%, 10% or 20%.
It goes back to a theme I have been going on for a bit now. I talked about it a bit yesterday on Market Talk. High volatility leads to low liquidity. People are scared of lower prices. What they do as lower prices come, rather than seeing it as an opportunity they see it as a risk and step away.
Or sometimes even exacerbate the selling by adding their shares to a situation where there is low liquidity or even no liquidity, which now pushes the price even lower. That explains the market mechanism of why a company the size of Facebook can see the price from the previous day marked down by 25%.
You have a bubble of desire for liquidity, comfort and safety, and an anti bubble for looking forward. That seems to be pervasive in the market, in my opinion, today. People are highly focused on right now in front of us and mostly looking backward.
I even saw several headlines in preparing for this video talking about how there’s been this huge rush of money into dividend stocks.
I won’t go a lot into this, but I can tell you from having spent a lot of time on our Blacklist, which are stocks of businesses that are in decline, borrowing money to stay in business, pumping their stocks up by keeping dividends at high levels, buying back stock at high levels, not investing in innovation, that this is a recipe for disaster.
Yes, I am sure people will come to troll me and say, “But in 2021 those stocks are up and your stocks are down.” Guilty as charged. Going back to the original premise of this video, Facebook and the metaverse. Let’s get into this.
Why Is The Metaverse Important?
Facebook reports and it says they are going to be making a $10 billion investment, not over 20 years, but in the next coming months in the metaverse. You just have to really stop and think when is the last time you saw a company have so much conviction and belief that they are going to invest $10 billion?
That’s a large amount of money. This is big money. And say, “We believe this is something that is going to happen in such a big way, we are going all in on this. We are going to take huge amounts of our time, effort, money and resources and dedicate it to it.”
Facebook, which is called Meta after the metaverse, is saying they think this is going to be so big that they are going to set aside what are very valuable properties. Their basic Facebook platform is still growing. It’s growing slowly, but still growing and generates billions of dollars in revenue.
They have WhatsApp, Instagram, their business that makes hardware for what was referred to as virtual reality. However, virtual reality is being supplanted by the idea of the metaverse. The forecasts are all out there, but what is this metaverse thing. What in practical terms will this let you do?
Why is it important? If you ask me why this is important I would tell you it’s because it ultimately delivers on something that is missing today that is needed, desired and wanted. Many people will scoff at this idea. I’ll just tell you a story. My mother lives in India. I speak to her from time to time.
I actually use WhatsApp to text her and call her. My mother is a widow. My father died 20 years ago. Other than a phone call, there is no real way to interact with her. On video the latency is really poor. It makes for a difficult experience. We are left with 50 year old technology.
I speak to her by voice and then I can send her texts. I would love to have some number of experiences with her where I am not required to physically be there. In the pandemic, there’s no real way to get to India easily without risking getting COVID or exposing myself to a quarantine in India or over here.
All these issues, but I would still like to be with my mother. Maybe we could see a movie together, share an experience together, cook together. My mother has always loved to cook and I have always loved to cook. The metaverse allows for that.
If you can build a virtual world like a movie theater where you actually go together and that movie is shown in this metaverse. For example, if I wanted to watch a movie with my mother and use Zoom and project my screen, the latency is unavailable at this point in time.
However, if you can solve that where we’re both in the same place and you get to experience that in a virtual way where you are present together, experiencing it together, this has value. This has a resonance for people who are apart and separated by distance and circumstances.
This is something we can do because the internet allows for it. It allows you to be in what people used to call cyberspace, but it really allows you to be together in this metaverse. It’s this universe that’s virtual that you can still feel, experience and sense.
This is why there’s so much excitement for the metaverse. It offers a new way of experiencing the world that can be shared. It’s desired and it solves a problem. Today, we are a global world. People from all countries live in all places. We no longer live in the same village, country or town or even city or state.
We would love a place where we can all get together without needing to travel. People will object and say, “That’s different than actually going to see your mother.” I understand that. I get that. Still, there are other ways where I can get some of the experience or even a different experience that has its own benefits and satisfactions by using a metaverse.
It’s creating opportunities where you can experience, interact, feel with your loved ones, family and friends in a way that’s difficult right now even if you were to put together a lot of different apps. Theoretically, you could. You could say, “You be on the internet at this time and I’ll be on at the same time and we’ll chat.”
However, if you could integrate all that together, that represents what the metaverse is and also the opportunity. It represents an opportunity to mirror a lot of things we do in real life and take it to this place called the metaverse. Now we have a choice. Instead of always needing to be physically there, it offers an actual alternative that is desired and valued.
I believe it’s something people are going to enjoy. It represents a human opportunity, but it also represents a massive investment opportunity.
Would Facebook Set Aside Their Platforms For A Bigger Opportunity?
This is why I believe Facebook is willing to set aside valuable properties like its Facebook platform, Instagram, WhatsApp, and take all of its understanding of how to scale something and say, “This is an even bigger opportunity.” This is huge. If they build this, people will come and experience their lives here.
That gives them this huge lead and this huge opportunity to make money because that’s what businesses are built for. Ultimately, to build sales and generate a profit and ultimately provide a service to you. I’m not going to tell you to buy Facebook here. It’s not in our portfolio.
However, 25% down in one day and the metaverse being this big opportunity, potentially the biggest internet-based opportunity related to our lives, most likely this is a buy. Again, this is opinion, not advice. I am not telling you to buy. We will not be putting Facebook in our Profits Unlimited portfolio.
I won’t be following up on it. If you decide you are going to buy it, that’s up to you.
I did want to make this video because between the sharp drop in Facebook — I should actually keep referring to it as Meta because that’s what the company is called today — the fact they are putting $10 billion in and seeing and understanding the metaverse opportunity for what it is, I felt this was valuable.
I hope you liked it. Come back next week. This is Paul saying bye.
Editor, Profits Unlimited