FB Update

So Facebook reported great earnings, signaled a moderation in CapEx, continued to grow topline at 20+%, even as the outrage surrounding the its questionable tactics began to subside.


The stock rallied nearly 40%+ this year, from lows ~$130 to ~$190. FB was my second largest position at year end: I started building a position last summer (a little too early), and ended with an average cost of $158/share (~20% paper gain).

So what do we do now? FB is still an insanely profitable growing company. If you take estimates for 2019 ($9-10/share), slap a decent but undemanding multiple (18-20x), and add net cash ($15/share), you get estimates between $180-$220. So at $190, it is still a reasonable buy (if you expect CapEx to go down, revenues and cash flow to rise, growth to continue, and weigh the moat appropriately).

But it is a lot less compelling than it was a quarter ago at $130.

I am happy to hold on, but the position has gotten a little too big (~11%) and more fairly valued. I wrote $210 calls on 1/4 of my position expiring late summer (long-term capital gains).

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