London-based Liontrust GF Tortoise Fund, whose 2022 investment return leads long/short hedge fund peers, took a long position in social media giant Meta Platforms after the stock slid by two thirds this year.
The fund's manager, Tom Morris, said it purchased the position in the owner of Facebook and Instagram last month, Bloomberg reported. It marks an outlying view of a stock most investors have fled in 2022.
Meta has struggled for a variety of reasons this year, not the least of which the Federal Reserve's decision to raise interest rates to fight surging inflation. That has pushed the overall U.S. stock market to its worst losses since the global financial crisis in 2008.
Meta's shares suffered additional pain amid challenges ranging from increased competition for social media advertising to investors' skepticism about the firm's focus on the metaverse for future growth. Earlier this month, Meta announced more than 11,000 job cuts, or about 13% of its work force.
Liontrust, on the other hand, has gained 22% year-to-date, exceeding the 12% decline for the Bloomberg Equity Long/Shorts Hedge Fund Index, by targeting firms it views as undervalued. That performance also tops 99% of the fund's global peers.
Morris told Bloomberg the fund has benefited this year from significant bets against the S&P 500 and Nasdaq indices, which have declined 16% and 28% year-to-date, respectively. Short positions in U.S. technology stocks and long positions in consumer staples and health care -- sectors generally viewed as less volatile in turbulent financial markets -- have produced further gains.
Big tech stocks such as Meta provided the main thrust for the S&P 500 Index's steady march to an all-time high on the first trading day of 2022. Meta's market value at the time exceeded $900 billion. It since dropped below $300 billion.
As a result, the price-to-earnings ratio of the company's stock, viewed as a gauge of value by investors, has fallen to 11 from 24 this year. That's a level reserved for stocks viewed as relatively "cheap" by investors, whereas tech stocks with optimistic growth outlooks traditionally have had high P/E ratios.
Shares of Meta, which now trade their lowest level since February 2016, fell as much as 2.1% in early trading Monday and remain on track for their worst calendar year return since the company's initial public offering in 2012.