Facebook Parent Company Shares Plunge in Value
February 21, 2022
Last Thursday, shares of Meta Platforms, which owns Facebook, plunged 26 per cent in value in just one day. Mark Zuckerberg lost US$29 billion.
For the last few years FANG shares appreciated significantly. FANG is the acronym for Facebook, Amazon, Netflix and Google.
When companies do extraordinarily well, many investors decide to hop on the bandwagon and purchase shares in those companies.
Consider the last hundred years when some companies soared to the top of success and enjoyed significant appreciation in stock values. That success did not continue.
In the years before, reaching their peak value stock prices rose significantly faster than the broad market. But in the few years that followed the growth of its shares was similar to the underlying market as measured by the S&P 500 index.
Investing is difficult. It’s not just a matter of seeing what did well last year and making that the sole reason that you would choose to invest. The history of success does not always repeat itself.
Think of the implications to someone that invested a significant amount of their portfolio in Meta Platforms stock. The one-day erosion of just over a quarter of their investment would be devastating.
The decision would be to hold and hope for recovery or sell. Sometimes companies rebound, sometimes they do not, and the decline continues.
The value of the S&P 500 index has had periods of decline but never has there been a time when the decline was not erased and values went on to new highs.
Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Watson provides wealth management services through Watson Investments. He can be reached at www.watsoninvestments.com