Vailshire Partners LP–a long/short, healthcare- and technology-focused hedge fund based in Colorado Springs–sold its entire stake in Facebook today.
Dr. Jeffrey W. Ross, the founder and managing director of Vailshire Partners LP and Vailshire Capital Management LLC, explained the reason for his removal of the world’s most popular social media site from his hedge fund’s portfolio: “Facebook has been a fantastic growth story for many years. However, during the recent quarterly earnings call, management made it quite clear that future user and revenue growth with slow considerably, while expenses will continue to materially increase.”
The market responded to management’s negative forecast by dropping Facebook shares (NASDAQ: FB) a whopping 20% on July 26, immediately following the earnings release and conference call. This dramatic plunge shaved over $100 billion off of Facebook’s market cap and moved the share price below its 200-day moving average.
Why Dr. Ross Sold Facebook
“While Vailshire Partners LP is focused on long-term, market-beating investments, I frequently use trailing stops to protect our investors against material portfolio drawdowns. Yesterday’s decline of Facebook’s share price moved it below its 200-day moving average and triggered our protective stop loss.”
Dr. Ross believes that Facebook is a fantastic company that is simply undergoing “a short-term blip” in a long-term success story. It will remain on Vailshire’s watchlist for the time-being as CEO Mark Zuckerberg and company sort through their current predicament.
“Like many of the great companies in the Internet Age,” Dr. Ross concludes, “Facebook will go through relatively short periods of uncertainty and poor market performance. However, in the long run, these companies tend to outperform the S&P 500 by leaps and bounds and should be granted second chances as their outlook improves.”
Given Vailshire Partners LP’s gross market-beating performance of approximately 14% (versus approximately 7% for the S&P 500) so far in 2018, Dr. Ross’s portfolio management techniques may be worth considering.
*Stocks mentioned in this article: $FB.
**This article should not be construed in any way as individual investment advice. Please see the important Disclaimer on Vailshire’s website for additional information.