With Facebook’s user growth in developing countries soaring, mutual funds focused on emerging economies are increasing investments in the California-based company.
Six years ago, 60% of the social platform’s 482m monthly active users lived in the US, Canada and Europe and the rest were from elsewhere.
Now fully two-thirds of its 1,7bn users are from the developing world. Researcher eMarketer estimates India will surpass the US next year as the country with the most Facebook users. It also ranks India, Indonesia, Mexico and the Philippines as the top four countries to see the fastest Facebook user growth until 2020.
“From a monetisation perspective, it’s still dominantly the US. But from a long-term opportunity perspective, it’s definitely emerging markets,” Charlie Wilson, MD at Thornburg Investment Management, said in an interview in New York. He has steadily added Facebook shares to the Thornburg Developing World Fund, and they now account for 3% of the US$1,2bn portfolio.
While the general trend backs Wilson’s thesis, it may be years before Facebook’s geographic revenue mix catches up with the shift in its user base. Three quarters of its revenue still comes from the US, Canada and Europe, down from 88% six years ago.
The Thornburg fund’s flexible mandate allows Wilson to allocate as much as 20% of capital to stocks whose issuers are not domiciled in emerging markets.
Thornburg now holds the second largest position in Facebook among 20 emerging market funds with exposure to it. In all, those funds own $249m in Facebook shares, up from $24m three years ago but still just 0,07 percent of its market capitalisation.
“This is probably one of the most unappreciated platforms even though it’s really well known and it’s a large market cap,” he said. “The fact that it’s de-rating while they’re still beating earnings by 5% or 15% every quarter is pretty interesting to me,” he added, referring to analysts’ moves to lower their ratings on the stock.
“From a global investors perspective, you are trying to gain access to some of these long-term penetration and market share opportunities that exist in emerging markets, that allow you to compound faster than a traditional developed markets portfolio,” Wilson said. “At the end of the day, does the person really care where the company is domiciled as long as it gives them the access to the opportunity?” — (c) 2016 Bloomberg LP