we purchased shares of Facebook, the company that controls two of the world’s most dominant social networking platforms, Facebook and Instagram. Facebook’s unprecedented global reach and ad-targeting capabilities have made these platforms some of the most sought after and effective advertising platforms ever created. We believe that the long-term outlook for digital advertising remains bright, and we expect Facebook’s advertising market share to increase. Excluding its large net cash balance, the company is trading at a modest discount to the S&P 500, based on next year’s consensus earnings forecast, even though those estimates include little to no contribution from valuable assets like WhatsApp and AR/VR (augmented reality/virtual reality), which Facebook has yet to monetize meaningfully. We believe this is an attractive valuation for a company that is projected to grow its revenue in the double digits for the foreseeable future and we think that Facebook’s operating margin potential is substantially higher than what the company is likely to report in the coming years.
