This Stock Could Be the Next Meta
Sharing a new HRC Capital portfolio addition that I think can follow a similar upward path this year as Meta did last year
It is said that history rarely repeats but often rhymes. Similarly in investing, studying the patterns of a past winner can position you to identify the next such opportunities.
Today I wanted to share with subscribers a new addition to the Hidden Rock Capital Model Portfolio that I think can follow a similar path as a big winner from last year, Meta (formerly known as Facebook).
For those readers who have been living under a rock the past 12 months, Meta has been one of the biggest winners among the mega-cap stocks, with the stock gaining more than 160% in the past 12 months (and more than tripling from its bottom in late 2022).
So what led to Meta stock’s meteoric rise, and how can we apply a similar pattern to look for the “next Meta stock”?
Source: Yahoo Finance
In my view there were 3 main factors driving Meta stock’s rebound:
Stock was priced for revenue (and earnings) to plateau or even decline long-term whereas the company still had many more years of strong growth left. In the case of Meta this was the temporary earnings decline from unsustainable pandemic-driven peak earnings in 2020-21, as well as fears that the company’s market share would be eaten away by competitors such as TikTok (which has proven not to be the case so far as there is plenty of room for multiple players to grow in the social media space).
Management shifted away from growth-at-all-costs mentality and clearly articulated (and started executing on) a more sustainable and profitable growth path. For Meta this was pivoting away from its AR/VR business (Reality Labs) and focusing on increasing profitability through its “Year of Efficiency” campaign
No credit was given to management being able to leverage its existing competitive advantages. In Meta’s case, they were able to leverage their existing billions of social media users to expand new business opportunities such as Reels or Marketplace.
So how do these patterns apply to the new stock we are considering today?