I Invested $182,000 Into This Broken Company

Market commentators and big investors often talk about the state of the market. They specifically describe the market that we're in as a bifurcated market. Bifrocated meaning that it's split into two different branches. Another way of describing this is the K-shaped economy or the K-shaped market. In the economy, this means that we have we have the wealthy people doing all the spending and then we have people that are struggling to get by. But we've heard the same thing now for the market over and over again. For example, CNBC says that in 2026, the stock market is looking a lot like the bifurcated market that we had in 2025. If you tune in to the financial news, you'll hear this point reiterated over and over again >> throughout the better course of the last couple of years. Now, the K-shape really prevail, which means that that top end of the K-shaped has propped up the consumer at large. >> We have that K-shaped market with the top end propping up the returns. We have Bill Aman just recently noting the same thing. I think it's hard to make a statement on the overall market because it's really a bifurcated market that we're finding a lot of really cheap stocks in a market that's hitting new highs. >> It's a K-shaped market, a bifurcated market, one where we're hitting all-time highs at the same time that there's many cheap companies according to Bill Aman. Now, we can even see this illustrated visually of how these returns are playing out. There are winners in this market and they are almost solely the AI beneficiaries. These have been the winners over the past year and a half. as we know they've pushed up the market uh to dramatic new highs. The AI beneficiaries go up while the AI exposed the software companies go down and then we have the AI insulated stocks or the global stocks that are simply being left out of the party. Now amongst those big winners of which we can name many all these AI stocks that investors are currently very excited about. Those are the ones that are pushing up the markets. The valuations are becoming stretched. Investors are piling in. every last dollar is being pulled from everywhere else to spend on these groups of companies. And while that party is going on, I'm focused on a different group of companies. And in particular, I'm focused on one company that I believe is being left behind. That stock is Meta. Meta is a broken stock. And it's a broken company. Or at least that's the impression that you would get if you looked at the news. Meta stock is now down to $582 per share. To put this in context, it is currently down 10% year to date. Over the past trailing year, it's down 16%. And then over the past five years, half a decade, Meta is only up 76%. That's notable because it's both being outperformed by the S&P 500, so broadly by the market itself, it's becoming outperformed. Then when we look at the tech index, which it's more closely related to, it is being crushed. The tech market's up 114%. And meanwhile, every day it looks like things are getting worse for Meta. And in fact, it's down 3.16% on the day. And this is a case where I believe investors are getting it wrong. This is a case where I believe that investors are focusing on the wrong things. And it's very predictable why this happens. When we look at the history of the S&P 500, it is very common for investors to focus on the companies that have recently done well. This is a very wellproven, wellserved, and studied phenomenon. It's called recency bias. Basically, investors look at the market. They look at where all the excitement is, the dollars are flowing to, where all the money's going, and those are the stocks that get the most eyes. They get the most focus, and they get the most capital. Because investors buy them, the stock prices go up, which encourages more new investors to buy, forcing the price up even more. And this is also described as momentum investing. See, momentum investing puts a nice face on this phenomenon, which would be called a bias, but now it's a factor. You can focus on momentum and simply buy stocks moving upwards. The danger with this strategy, as we've looked at throughout history, is momentum works until it doesn't. Momentum is a wellproven factor in the market. It can push stock prices up quickly. But just like it pushes them up quickly, momentum investing is invariably followed by sudden and dramatic draw downs. We've seen that many times in the past. And I've warned about this same thing before. 5 years ago, this is 2021, I published a video titled a warning to ARC investors. Now, we don't have to go over the entire thing, but we can just take a look at one aspect of it. This is at the time in 2021 in the trailing 10 years. You can see that the S&P 500 in blue that was up 111%. the QQQ in yellow that was up 232% and then you had Arc Invest that over the trailing 10 years had trounced both indices. It was up 615%. Kathy Wood was the hottest investor ever at that time. She was on fire. Everything she bought went up. Everything was noted to be innovative and disruptive and the new companies that you had to own. They're going to change the world. They're going to revolutionize everything. I heard all of these arguments and looking back you may say, "Well, that was obviously flawed. The valuations were unreasonable. Investors should have known that it would come back down, but they didn't. Many investors were bought into this. Lots of investors owned Arc Invest. That's why the fund went up. It went up because both institutional and retail investors were buying it handover fist. Since that was published, ArchInvest stock has crashed. It's still down 50% from its all-time highs and the S&P 500 and the QQQ have raced away with the lead. The investors that bought into Arc Invest were devastated, of which there were many. There was a lot of capital in this fund. It wasn't some small niche fund. This was massive and mainstream. In fact, Arc Invest topped the list of Morning Stars wealth destroying ETFs. It destroyed over 14.3 billion primarily of retail investors money. Now, the reason that I bring this up is to show that human behavior does not change. The circumstances change, the companies change, the big-time investors promoting promoting everything changes. But overall, investor and human attitudes do not change. Back in 2021, it was Arc Invest. It was disruptive innovation. It was companies that were working with technological disruption. These were the platform category changers and the killers. These were the companies that everybody needed to own to get the best returns. And investors fled into them. the marketing was accepted. Today, there's a very different group of winners. I believe today's winners are stronger fundamentally speaking. Many of them have real fundamentals and real capital behind it. But we're seeing a lot of the same attitude of investors chasing returns with recent winners. And that recency bias, I believe, is taking hold in this market. At the same time, while the rest of the market is chasing all these recent winners, it's leaving opportunities, companies that are being left behind that are fantastic companies. Meta being what I believe is the primary one today. When I look at Meta, this is a company that I believe strongly enough that I have over just the past six months, I've added $182,000 to this position. Okay, 182,000. My average share price is 684 bucks. That currently makes me around $28,000 in the red on this company. It is my biggest loser uh by far. Met is the the biggest one that I'm in the red on. You can even compare it to the Dualingo, right? Duolingo is down 70%. But because that was a much smaller position, that's only down around 15,000. It's actually moving upwards. Uh we're getting closer to break even on that one. But when we really look over my entire portfolio, Meta sticks out as a sore thumb of a company that continues to go down. And there's a number of reasons that Meta Stock continues to go down every single day. The first one is the company culture and employee morale. This is something that we've seen over the past year. There are just report after report of how bad Meta's culture is, how uh sad employees are. This comes with the layoffs and it comes with the leadership changes. It comes with lots of different news reports. For example, we have here from Reuters. This is just recently. Zuckerberg says that Meta made mistakes in its AI workforce shift. Business Insider notes that Meta's CTO says morale is almost quote the worst it's ever been. So, the chief technology officer is just straight up saying that Meta's morale is terrible. We have the CTO again admitting that the company's AI reorg was quote atrocious. This was an internal memo, so he's not saying this publicly, but this was leaked of him saying, "What's going on today is atrocious in Meta." We've had articles like this. A Meta employee gets real about the horror of working there right now. Met is trying to change around the culture and reignite employees with a new hackathon, and employees aren't responding well. Met employees absolutely hate Zuckerberg's plan for a companywide AI hackathon, quote, "I'm not sure this company supports a hackathon culture anymore." One employee posted in a forum open for the entire staff. And this isn't the end of it. We could go on for hours here looking at all the articles, all the posts, all the social media points of how bad Meta's culture, how bad employee morale currently is. It's not a fun thing to see as an investor in the company. You want to be invested in companies that have great culture, excited employees, and the stock moving to all-time highs. In this case, Meta has terrible culture, employees are obviously upset, and the stock is moving down to 52- week lows. Now, these employee morale and culture problems at Meta are not the only reason the stock is moving downwards. We also have news that in the last earnings report, Meta lost 20 million users last quarter. So growth is declining according to many reports and Meta is quickly expanding its content controls for teens globally and testing new Instagram tools to diversify feeds. They're doing this in a response to losing a major lawsuit that opens the floodgates of more teens suing Meta because of damages that they've previously done. So there's also regulatory risk with Meta. And then of course we have the additional reason that they're one of the big capex spenders. investors are concerned about the unprecedented amount that Meta and many other big AI companies are spending. The difference with Meta is that unlike Google, Azure, and AWS, they don't have a hyperscaler cloud business. Meta is spending all this money only for their own needs and only for their own business. They're trying to become a superpower with AI models themselves, but that's a hard dream to sell to investors. All of this has resulted in a stock that continues to plunge. In fact, with Meta going down into the 500s, we now have a stock that is below a $ 1.5 trillion market cap. It trades at an 18 forward PE ratio based on the next 12 months. In 2027, based on current analyst estimates, it's trading at a 17. Even on a trailing basis, this 20 PE ratio is misleading because Meta had to pay a one-time tax. If you normalize for that, it's more like an 18 trailing PE ratio. So, Meta is currently trading in the teens PE ratio. The S&P 500 currently sits at a 21.5 Ford PE ratio based on this current estimates. Meta is at a substantial discount to the S&P 500, the broad market index. This includes a lot of utility companies, real estate companies, everything else in between. Consumer packaged goods, companies growing 7 to 8% per year are included in this basket. When we get to the more tech heavy basket, the ones that are a bit more similar to Meta, it's at a substantial discount. The QQQ trades at a 27 forward PE based off of current analyst estimates. Again, Meta is at an 18. We know that Meta is cheap by its operating income, by its enterprise value to IBIDA, by its earnings per share estimates, by its historical valuation. On every metric that we look at, Meta is a cheap company. And again, we know the reasons why, of which I want to address a couple of them because when I look over the reasons why Meta is trading cheap, I believe that investors again have these wrong. When we look at Meta's poor culture, we're getting inundated with reports every single day of how bad the morale is and the culture is. And this causes many investors to form opinions on Meta's stock, especially when Meta stock is going down. And this type of decision-m to not invest in Meta because of bad culture is a pseudoscientific haphazard form of investing. And this type of investing has never it's never amounted to good returns. In fact, it has the potential to make it so you have much worse returns. A lot of the things that Meta is being blamed for as having bad culture are the very same things that they will be attributed to great culture in the future. For example, the big capex spend. Right now, Mark Zuckerberg is looked at as wasting money. He's wasting money on this capex spend. That's what investors are concerned about. He's going to have very low returns. So, they're questioning his leadership and his judgment. They're saying that he doesn't really know what he's doing and he's chasing some dream and it won't work out. But if it does work out, if he actually creates a really good uh company return, if all this AI spend does help a meta create new experiences, more ad effectiveness, make it so that they can build tools faster internally so that they can come out with new projects faster, new releases faster. If it increases all the metrics and met Meta stock does recover and go up to all-time highs, we will look back on the exact same news of this capex spend and say that he was visionary, that he was he was ahead of the time, that he proved all the doubters wrong. Oh, how great Mark Zuckerberg is. It is always hindsight looking. Investors look at the current stock price today and then they fill in reasons to be bearish or bullish on the company. And you see that every single time with company culture. We can look at different examples of this throughout history. Back in September of 2022, this was squarely during Netflix's stock decline. We had layoffs at Netflix and some staffers questioning the company strategy and culture culture problems at Netflix. In let's take a look at the time, April of 2022. This is when Netflix was like $20 a share. It is up over 300% since this culture problem at Netflix. We had more and more articles very similarly. April 28th, 2022, during the exact bottom of Netflix's stock price. Netflix staffers voiced frustrations and fears of cutbacks ahead. Problems internally with Netflix. The company's disjointed. It's falling apart. And look at the stock price. Of course, it is. You don't hear the same issues about Netflix's culture problems today because the stock price has recovered. Again, this pseudoscientific backwardslooking hindsight investing did not work with Netflix in the past, and it won't work with Meta today. We can look at even more examples of this. We saw the same thing with Shopify. When the stock price was down, they were laying off workers and many people questioned their culture. The stock price recovered and nobody questions their culture today. The most striking example of this recently was Google. I was in this stock during a time period where people questioned the culture. Remember those day in the life of Google employees where they're treated as as simply just going and playing at work, going into ball pits and rock climbing courses and getting massages and uh working from home, you know, phoning it in. The the the culture of Google was described as basically a playground for adults that no serious person would go to Google. In fact, you even had entire big-time investors like Chris Hone harshly criticizing the company culture, saying that they're way overpaid. They need to be fired. We need to get rid of them. That was all during the bottom of Google. That was all during back in 2022 when it was selling for $70 per share. The Google staff was sounding off about corporate overlords and impersonal layoffs and a changing company culture. This report says in January 15th, 2024, Google stock was about $110 during that time of bad culture. It's now around $360. Does anybody care about Google's culture anymore? No, of course they don't. The stock price is up, so they're doing great. And everything that Sundar Pachai did was visionary and revolutionary, and he's the greatest leader ever because the stock is up. See how manipulated this news is? Anytime a stock is going down and the company is already beaten down, investors pile on, new sources pile on, and everybody gets validated with their perceived notions of the company. And we see this happening with Meta, like one employee getting featured in an article trying to give broad sweeping judgments about the culture. But Meta employs tens of thousands of employees. Now, I'm not saying that Meta has a great culture or even a bad culture. I don't really know and I don't really care because it's not that important in the investment. Meta's core economic engine will surpass any cultural problems like it has for any great compounding machine. Over the past 20 years, all these companies like Microsoft, Amazon, and Meta have gone through different periods of different cultures, different struggles, and different challenges. If you were to sell the stock every time it went into some challenging environment, you would sell it at precisely the lows every single time. That's a problem with looking at this type of news and using it as an investment thesis. The other thing that I see highlighted with Meta continually is this repeated false news. This is the definition of news that is technically correct, but it's also overwhelmingly misleading of the current state of the company. This, for example, is from The Verge, but you could list off a bunch of different news sources from this. Meta lost 20 million users last quarter. If you go dig down into the article after a few paragraphs, you'll finally get to where they explain the reason that the users went down. They say that Meta attributes this fall to internet disruptions in Iran as well as restrictions on access to WhatsApp in Russia. That is what they attributed it to. And in fact, they said that they they know for sure that's the reason why like they can clearly see that is the reason why. And they also noted without those two things their organic usage is actually increasing. So Meta organically as a company is growing in its daily active users. But they said that these two things, specifically the WhatsApp restriction in Russia, just blocking a bunch of people, is what caused that 20 million to go down. The way that the news reports on this is by blasting it in the headlines that Meta is shrinking. And then they bury all important context deep into the article behind payw walls. And then even after that, these Meta-hating publishers try to give further damning critique on Meta. It's up to you whether to take Meta on its word, given that by bundling the user stats together across all its platforms, we can't tell which ones are most impacted. If I wanted to obscure that a leading social platform was potentially hemorrhaging daily users, that's certainly what I would do. These publishers are outright accusing Meta of intentionally misleading investors and obscuring user data, hiding the fact that they're hemorrhaging daily users, that Meta is in decline. Compare and contrast that against what Meta actually said on their earnings call. They say around 3.5 billion people used our meta apps daily in March. Reported dailies dipped slightly versus December due to the Iran outages and what app restrictions in Russia, but would have grown without those two events. They continue on. Facebook and Instagram daily and monthly activives continue to grow with video driving all-time high engagement on both platforms. So, I realize the authors at the Verge took no time whatsoever to actually read into the report or the data that Met is giving out, but they do break down the usage by different categories and different apps. They say both Facebook and Instagram are growing and they grew in the last quarter even amongst this decline in users. The decline was WhatsApp. They say that it remained strong globally, including in the US. Threads is described on track to be the leading app in its category. The hilarious part about this is while these news outlets like The Verge that have this deep-seated hatred towards Meta try to confuse investors themselves, they are doing the very thing that they're accusing Meta of doing. They are obscuring the facts and intentionally trying to confuse Meta investors and their own readers in the process. Meta is growing. The usage is growing. The engagement is growing. The new daily active users will likely even tick up next quarter as this one-time event surpasses. On that note, Threads, another Meta property that competes with X or Twitter, hit 500 million users. Threads reached 500 million monthly active users and rolled out new personalization features like your algo feed controls, strengthening Meta's position as the main X/ Twitter alternative and deepening engagement that can support future ad and AI monetization. So, Meta had a one-time restriction in Russia that impacted their overall numbers to a tiny degree. Outside of that they are growing organically in Facebook, Instagram, WhatsApp across the US across the world and also with threads they reach 500 or half a billion users on threads active now. In every meaningful way the company's growing in engagement but online you'd get the exact opposite impression. Online like the Verge and many other outlets engagement is going down and the company is hemorrhaging users to use their own words. It's clear here that we're being lied to continually about Meta, about its growth, about its prospects by a media that doesn't like Meta and hasn't for years. So, they have direct reason to want to lie about this company. Now, to address some of the other concerns, we have things like this. Meta is expanding King Controls. This is, of course, in response to some lawsuits they've faced over teens spending too much time on their their applications. And we have the same thing with YouTube. There's complaints that teens and kids are spending too much time on these applications. Meta is rolling out all these controls to make it so that parents and teens have more more ability to limit their time and it doesn't become a toxic relation or something damaging to the teen. Now, in this case, this is something that's looked at as a negative by the market. At least today we see it reflected in the stock price when in reality this should overwhelmingly be a positive both for teenagers and kids using Meta's products and the stock. For example, if Meta is viewed as a toxic product for kids, one that's damaging, that's going to make it so that advertisers are less likely to want to advertise on it. You'll get fewer blue chip advertisers on Meta. If the product becomes viewed more responsibly if it has better controls and this type of hysteria around teen usage on Meta actually calms down, that'll make it more attractive to advertisers, which is how they make all of their money. This is something that will also be difficult for other newer applications to match metaphase's other social media tools to build out all these logistics of managing different users and parental permissions that is difficult to do. So this does create somewhat of a regulatory burden or rather another hurdle for newer social media companies to actually match what Met is currently doing. This raises the mo for the company and potentially makes it more attractive to advertisers. I believe this will be looked at as a positive development in Meta's history over just the next couple of years. And then finally, we get the capex buildout. All that money that Meta is spending, will they get a positive return? This is another example of investors being incredibly shortsighted. They're looking at just the simple ROI calculation of spending on this infrastructure. While that's meaningful in the very short term, what Mark Zuckerberg's doing here is actually very forward-looking. It's for the long term of the company. Meta is not a social media company. It is a technology company. Zuckerberg describes it as a company that builds new applications, new experiences, new features. To be able to build all of this stuff, you need to have the best tools possible. If Meta is reliant on renting those tools from Gemini, renting them from OpenAI or Anthropic, then now they're no longer full stack. They're beholden to someone else. They have the pricing power. They're the ones that can determine how much they're paying. This is the same situation that Apple's found itself in. It's relying on other companies like Google to be able to power its AI usage. Meta doesn't want to be in that same situation. They want to have control over their destiny. This guarantees that going forward that they don't have to rely on others for the direction they go. We can again already see all of this in the numbers. Meta is growing its revenue by like 30%. Over 2026, it will grow around 25% revenue. For a stock trading on an 18 Ford PE, it's growing twice as fast as the S&P 500. It's growing faster than many leading tech companies, including its counterpart, Google. Meta is an incredibly fast growing, highly organically profitable company. They will spend on capex for a time to build out supercomputing powers. When we look back on this, I believe in 5 years when the stock price is much higher, when we can see things moving in a more positive direction fundamentally for the company, I believe investors will look back at this capex spend as being forward-looking as an example of Mark Zuckerberg being on the ball and making his company have a wider moat and a better future. So, as of now, I still remain fully bullish on Meta. Now, moving on. This wouldn't be a complete episode if we didn't mention the fail of the week, which in this case is the CEO of Snapchat, Evan Spiegel, and Snapchat in general. He just came out with this new VR headset that they've been working secretly on for some time. And let's go ahead and take a look at this new VR headset. >> Kelly, thanks so much. And Evan, thanks for joining us here today. You're wearing your new specs, which you just unveiled. They cost $2,000. This is This is real. Like, this is not AI. Oh my gosh. Okay. That's really the CEO of uh Snapchat. These these glasses. I mean, he he looks like he looks like he's about to like weld something. Like it's a a welding mask in front of him. They they look like coke bottle glasses. I I think that Charlie Munger's glasses were less thick than these things. In fact, I'm pretty sure they are. Uh I don't even know how to describe it. They're so incredibly bulky. For people listening to this on the podcast, you have to look this up. They are so incredibly bulky. They're the thickest rimmed glasses I think I've ever seen. But if we look at this, it continues on describing this new product unironically holding a big event over it. $195. The stocks down more than 5%. How do you address investor concerns about the potential market for these? >> Well, Julia, thanks so much for joining us here at AWE. It's been such an exciting day for the company. It's something we've been working towards for more than 12 years now to really bring computing into the world and make it more human. And I think it's something that people are really looking for in this moment. He's going to bring bring computing into the world and make it more human by making him look like a robot with a a robot mask on. Th this is the least human normal organic thing that I've seen. Just the sides, they go back so far. The sides of these glasses, it's insane how thick these glasses are. >> Moment where they feel like screens are distracting them. People are spending on average more than seven hours a day staring down at screens instead of connecting with their friends and staying present in the world. He's complaining now that screens screens are distracting all of us. So, I have the solution. Let's make it so we have giant VR screens an inch from our eyes that can project things right in front of our our mug, right on our face. Screens are distracting us. So, let's put two huge screens right on our face. And we think specs offer a totally new opportunity to bring computing into the world around you and help computing feel more human and more personal. >> During your keynote, you took a jab at Mark Zuckerberg and you said the folks up north aren't going to be able to copy these, but Meta right now is selling much lowerric devices. >> Oh gosh, I hope he's right. I hope that Meta can't copy these. And more importantly, I hope that even if Meta has the ability to copy these, which I believe they could, Meta is a much bigger uh more wellunded, more technologically savvy company than Snapchat. But even if they could, the hope is they won't. I would never want Meta, Evan, you don't have to worry about Meta copying these. I would never want Meta to copy these. That would be investors would hate this. The reason your stock is down is because of these glasses. He's He has such a delusion that he's concerned that competitors are going to copy this. That's how delusional he is. He thinks that he has the hottest glasses on, like these devices. Oh, we got to keep these to ourselves. Nobody wants to copy these. Apple's not looking at this saying, "Oh, that those are the next big sellers. We got to copy these gigantic, goofy looking uh gigantic ridiculous glasses." That's not what they're wanting to copy. This is the worst in between possible. They're too small to be real VR headsets. Like if you wanted to just do a full VR headset, then just do it, right? Something you really can't wear out in public. It's just a private VR headset. Either do that and just do it well. Or make it look like actual sunglasses. Make it look well. That's what Meta did with the Ray-B bands. They actually look decent. They don't look like these. These look completely different. These are somewhere in between the the big normal VR headsets and the Metar band sunglasses. They're in the worst spot possible. This is the worst product development you could have possibly landed on. You have the $250 glasses with AI via audio. They have an $800 version of these. Yours is so much more expensive. Aren't you concerned about competing? >> Well, I I think you rais a really interesting point today. If you look at the market, it's bifurcated. You either have smart glasses, which you know are lightweight and wearable but aren't really capable of much. They're almost more like AirPods or something a phone accessory. And then you have headsets which are very capable and immersive. Uh but they're also, you know, clunky and and hard to wear. They shut you out of the world with virtual reality. He's calling headsets funky and hard to wear. Well, his head's bobbling and these gigantic glasses. You could never hold a normal conversation with someone wearing these. It's surprising that a company as big as Snapchat are releasing these. I would think it would be some upandcoming startup that I've never heard of that like this is their first thing they've came out with. But apparently Evan, he believes these are great. These are going to be a great product. Maybe I'll be shocked, but I don't think that they're going to sell a single one of them. I think the ones that Evan buys are going to be the only ones they sell, but we'll have to wait and see. That is all for now. Hope you enjoyed. See you in the next one.