The company formerly known as Facebook is now Meta Platforms (Nasdaq: META), renamed to reflect its wide scope of operations. Along with the overall market downturn, its shares were recently down 55% year over year, presenting an attractive buying opportunity.
What’s going on? Meta’s growth rate has slowed significantly lately. And it’s investing heavily in its reality labs segment, which features augmented and virtual reality consumer hardware, software and content – not yet a big moneymaker.
Meta Platforms itself, though, is very profitable, with more than $40 billion in cash, cash equivalents and marketable securities on its balance sheet. Indeed, the social media juggernaut is a cash cow. Its trailing-12-month free cash flow (the cash left over after both operations and capital expenditures are accounted for) was recently $35.8 billion.
Moreover, Meta’s Facebook, Instagram, Messenger and WhatsApp platforms are used each month by about 3.6 billion people who share more than 140 billion messages daily. Meta’s shares appear oversold and are worth a closer look.
(The Motley Fool owns shares of and has recommended Meta Platforms. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors.)
Ask the Fool
Q. Are unit investment trusts like mutual funds? – PS, Winona, Minnesota
A. Both are regulated and offer diversification via an assortment of stocks, bonds and other securities, but they differ, too. At the end of each trading day, mutual fund shares are issued and redeemed on demand at a specific price (the “per share net asset value”) that reflects the total market value of the fund’s holdings divided by the number of shares. The number of shares is not fixed; if lots of people want to buy in, the fund company will issue more shares and have more money to invest.
Unit investment trusts, or UITs, in contrast, have a fixed life, debuting via a one-time public offering and ending on a specified date via liquidation. While mutual fund holdings often change a lot over time, UITs feature a relatively fixed portfolio of investments. Investors who want to trade UIT shares do so on the secondary market, where share prices may be higher or lower than the net asset value of the trust’s holdings. Learn more before investing in a UIT.
Q. Can you recommend any good books about how to spot bad behavior by companies in their financial reports? – CF, Greensburg, Pennsylvania
A. Check out “Financial Shenanigans: How To Detect Accounting Gimmicks & Fraud in Financial Reports” by Howard M. Schilit and Jeremy Perler (McGraw-Hill, $40); “What’s Behind the Numbers? A Guide to Exposing Financial Chicanery and Avoiding Huge Losses in Your Portfolio” by John Del Vecchio and Tom Jacobs (McGraw-Hill, $36); or “Financial Intelligence: A Manager’s Guide To Knowing What the Numbers Really Mean” by Karen Berman and Joe Knight with John Case (Harvard Business Review Press, $35).
My smartest investment
My smartest investment has been in Lockheed Martin stock. I bought my shares when they were at $87, and they’ve more than quadrupled in value since then. – DM, online
The Fool answers: They’ve actually nearly quintupled in value at this point – congratulations!
Despite an ongoing war in Ukraine, though, this major defense contractor has not been firing on all cylinders lately. Lockheed Martin’s last earnings report was disappointing, with revenue declining more than 9% year over year, while operating profit fell more than 10%. In part because of a large pension settlement, net income plunged 83%. On the plus side, free cash flow improved by 8% year over year, with the company reporting cash from operations of $1.3 billion.
Still, there are ample reasons to be bullish about Lockheed Martin’s future. CEO James Taiclet noted: “Although revenue in the period was affected by supply chain impacts and the timing of customer contract negotiations, our cost management initiatives resulted in (profit) margin expansion. Moreover, our robust cash generation also continues to provide the resources to invest in building the foundation for future revenue and margin growth opportunities.”
Meanwhile, the company also has three contracts with NASA for work related to Mars missions, and it raked in nearly $12 billion last year for space work. You’re sitting on a big gain – dig more deeply into the company to see if you expect further growth ahead.