Big Money Is Pouring Into Facebook From All Directions

| About: Facebook (FB)

Institutional holdings were just made public on Thursday afternoon. The results always vary by company, but it is very clear that the Big Money had already jumped into Facebook (NASDAQ:FB) ahead of the rest of the crowd. New and increased positions at the end of Q2 totaled 321,477,643 shares versus decreased and sold out positions of 137,215,443 shares.

According to NASDAQ:

Facebook Institutional Ownership Summary:

Ownership Analysis # of Holders Shares
Total Shares Held: 748 916,988,205
New Positions: 139 95,903,711
Increased Positions: 408 225,573,932
Decreased Positions: 252 98,983,932
Holders With Activity: 660 324,557,864
Sold Out Positions: 74 38,231,511

Top 15 Facebook Institutional Owners:

Owner Name Date Shares Held Chg Shares Chg% Value 1,000s
FMR LLC 06/30 75,812,359 1,547,642 2.08 2,771,700
VANGUARD GROUP INC 06/30 46,160,109 4,531,884 10.89 1,687,614
INVESCO LTD. 06/30 36,421,901 7,666,137 26.66 1,331,585
SANDS CAPITAL MANAGEMENT, LLC 06/30 35,724,981 690,411 1.97 1,306,105
MORGAN STANLEY 06/30 32,047,660 (3,011,290) (8.59) 1,171,662
PRICE T ROWE ASSOCIATES INC /MD/ 06/30 30,798,011 (13,277,813) (30.13) 1,125,975
STATE STREET CORP 06/30 26,715,485 11,827,272 79.44 976,718
JENNISON ASSOCIATES LLC 06/30 24,583,587 3,699,872 17.72 898,776
BAILLIE GIFFORD & CO 06/30 23,690,777 288,482 1.23 866,135
BARCLAYS GLOBAL INVESTORS UK HOLDINGS LTD 06/30 23,550,491 9,715,722 70.23 861,006
PARAMETRIC RISK ADVISORS LLC 06/30 20,475,434 20,475,434 New 748,582
AMERIPRISE FINANCIAL INC 06/30 17,385,711 (166,501) (0.95) 635,622
ELEVATION MANAGEMENT, LLC 12/31 16,989,027 16,989,027 New 621,119
UBS GLOBAL ASSET MANAGEMENT AMERICAS INC 06/30 15,321,204 (1,861,083) (10.83) 560,143
MAIL.RU GROUP LTD 06/30 14,210,507 14,210,507 New 519,536

In early June, it became apparent that a lot of analysts were suddenly getting "bullish" on Facebook. At that time the shares were trading for as low as $22.67, and many investors were still leery of the company. The end of the quarter, on June 30, was when the above institutional funds owned what they are reporting now. The stock sold for $24.97 at that time. Record earnings were then reported on July 24, and caused the shares to jump 30% the next day. Facebook eventually hit a new 52 week high of $39.32 on August 5:

Prices of Facebook Stock Reported Weekly:

Date Open High Low Close Avg Vol Adj Close*
Aug 12 38.20 38.50 36.02 36.56 50,282,200 36.56
Aug 5 38.43 39.32 37.70 38.50 59,426,500 38.50
Jul 29 34.07 38.49 34.01 38.05 126,082,700 38.05
Jul 22 25.99 34.88 25.72 34.01 127,562,100 34.01
Jul 15 25.93 26.78 25.60 25.88 29,557,600 25.88
Jul 8 24.47 26.00 24.42 25.91 25,497,900 25.91
Jul 1 24.97 25.06 24.15 24.37 17,402,500 24.37
Jun 24 23.95 24.98 23.38 24.88 45,340,500 24.88
Jun 17 23.91 25.19 23.65 24.53 38,152,700 24.53
Jun 10 24.06 24.60 23.26 23.63 35,318,200 23.63
Jun 3 24.27 24.32 22.67 23.29 38,854,800 23.29
May 31 24.63 24.95 24.27 24.35 35,925,000 24.35
* Close price adjusted for dividends and splits.

In the meantime there has been a lot of negative chatter on financial sites, blogs and articles about the insider stock sales at Facebook this summer. According to Yahoo Finance, 4.7% of the insider shares have been sold in the last 6 months. This number is skewed due to Zuckerberg's shares. But all of the sales were "automatic sales" sold under a 10b5-1 plan. These sales (to me) are meaningless because they do not offer any investing information whatsoever:

Insider Transactions :
Net Share Purchase Activity
Insider Purchases - Last 6 Months
Shares Trans
Purchases N/A 0
Sales 9,551,710 64
Net Shares Purchased
(9,551,710) 64
Total Insider Shares Held 194.78M N/A
% Net Shares Purchased
(4.7%) N/A

Insiders create a 10b5-1 trading plan to either buy or sell in advance of the actual trade which usually will take place on a specific date or dates. The plan must be set up before the insider has any non-public inside trading information:

For example, executives may want to purchase shares throughout the calendar year. To do so, they (under the plan) purchase a fixed number of shares at specified dates, such as the first trading day of the month. The transaction is automatic. The insider will be safe even if he or she has insider information at the time of the sale, as long as the plan was set up when no material non-public information was known. Conversely, if an insider wants to diversify his or her holdings but doesn't want to sell a large portion of stock at any one time for fear that it might send the wrong message to the investment community, the individual may set up a plan that liquidates 1,000 shares per month over the next year. Again, the trades are automatic and take place at a set point in time.

So I think this is just a lot of FB insiders diversifying their portfolios. The money has probably been burning a hole in their pockets since the IPO over a year ago. If not, and they were betting against the company, they all bet wrong.

The big question now, is where is the stock headed from here? The jump in share price last month was due to Facebook's ability to produce mobile ads and the new reports that video ads will generate a tremendous amount of revenue for the company in the near future. According to Mashable:

A report released by Morgan Stanley on Wednesday predicts that Facebook's video advertisements will generate more than $1 billion in 2014 - a lofty total considering they don't exist yet. This total would constitute 1% of all television ad spending in the United States. Morgan Stanley predicts Facebook's video ads could generate as much as $6.5 billion by 2020.

Analysts are already estimating Facebook's revenue for 2013 to be $7.31 billion, up 44% and 2014 sales to be up an additional 30% at $9.5 billion. Another billion dollars will just be icing on the cake in 2014. They also had predicted EPS of 14 cents for Q3, but that number has just jumped to 18 cents in the last 7 days. Ironically Morgan Stanley reduced its FB shares by 8.59% in Q2 (see the chart above).

Many investors continue to think that the stock is overpriced, but it would take a major event to drop the shares much lower based on these new numbers. I think that it will bust through its current high target of $46 in 6 to 8 months. If there is a correction this fall, I plan to buy the dip.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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