Senators Make FB Stock a Buy
“Lined up end to end, they would stretch to the moon and back 27 times...”
The Marlboro Man was one of the most successful ad campaigns... ever.
Cigarette-maker Phillip Morris & Co. — now Altria (MO) — introduced the Marlboro brand as a women’s cigarette in 1924.
By the 1950s, data was coming out that smoking was harmful.
Marlboro and other brands added filters to their cigarettes. It was supposed to give off the impression of being “safer."
Market research was showing that men were switching to filtered cigarettes. But Marlboro was still seen as a “women’s cigarette.
All that changed when Chicago advertiser Leo Burnett repositioned the brand.
Instead of focusing on the filters and the benefits a safer smoke, he went in the other direction...
He used a cowboy to represent the manly image of the "new Marlboro." And the rest is advertising history.
In 1950, Marlboro’s market share went from being less than 1% to being the fourth-best-selling brand.
By 1957, sales were at $20 billion — a 300% increase in two years.
By the 1990s, Marlboro was the world’s world's best-selling consumer product.
Philip Morris sold 124 billion Marlboros in the U.S. in 1992.
The brand had annual sales of 6 billion packs in the U.S., which was as much as the combined sales of the next five top-selling brands.
The Marlboro brand alone has more U.S. revenues than well-known companies like Campbell Soup Company, Kellogg's, and Gillette.
But executives at Phillip Morris were seeing cracks developing.
Generic brands were starting to eat into Marlboro’s market share...
Price Cut Creates Big Opportunity
Phillip Morris had to do something. And what it did shocked the stock market.
On April 2, 1993, Phillip Morris announced a 20% price cut to Marlboro cigarettes.
The reduction cut the price of a pack by $0.40 to $1.80.
When the stock market opened up Friday morning, Phillip Morris’ stock plunged by 26%.
That day became known as "Marlboro Friday."
Investors freaked out and started to sell companies with national brands.
Nabisco, Heinz, Coca-Cola, and other major companies were sold during the panic.
On that Friday, investors saw the price cut as “the death of the brand.”
But instead, the new “value-minded” consumer would no longer have to pay up for brands...
Smart Investors Swoop In
Over the next few months, the emotional view — that brands were dead — didn’t play out.
Instead of selling, intelligent investors bought.
One of them was my friend Don Yacktman. At the time, Don had been running the Selected American Fund.
Several years later, I met Don for coffee.
Don loved investing in brands. His portfolio was made up of companies like Procter & Gamble, Coca-Cola, and Pepsi.
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He told me that the dividends he receives from these stocks are greater than the prices he paid when he bought them!
Don chuckled, “That’s what happens when you invest intelligently and not emotionally.”
Don later went on to be named Morningstar’s Manager of the Year.
And in the early 2000s, he built the Yacktman Family Funds into a $20 billion asset manager...
We now have a ringside seat to another emotional sell-off.
On March 17, 2018, the New York Times, and the Guardian reported that a voter profiling company had used data sourced from Facebook (FB).
The company, Cambridge Analytica, had used Facebook users' data during the 2014 American midterm elections.
After the news was out, Facebook’s stock sold off by more than 7%. In one day, it wiped out $35 billion from its market value.
Over the next week, the stock would fall close to 20% from additional selling:
I didn't know enough about Facebook to make an investment.
So, I called some of the smartest investors I know. Was Facebook a buy?
Each one of them told me the same thing, “We're loading up on FB.”
They ran the numbers, priced in the damage, and came up with a valuation...
The conclusion they all independently came to?
Facebook is a bargain at $160 per share or lower.
So, I started making some calls to contacts I knew in the digital marketing business.
These companies all spend big money on behalf of their clients to advertise on Facebook.
“Facebook isn't going away.”
I watched as Facebook’s founder, Mark Zuckerberg, testified before a Senate committee.
Listening to their questions, I quickly realized that the senators didn't have a clue.
I'm guessing that government regulation is still years away — if it happens at all...1
My mind is always on and focused on how I can make the best of any given situation.
The recent news with Facebook is just one example. I spend a lot of my day researching to bring you the information that you'll need to get ahead in the investing world.
I was intrigued by all the news that’s been happening with Facebook. And I had a feeling there was an opportunity surfacing that I wouldn't want us to miss out on.
So, I had to research further, which then led to me asking some of the smartest investors I know about Facebook. I needed to know, and I didn’t want to miss out on something great.
If you don’t want to miss out on other investment opportunities, I suggest signing up for my other Park Avenue Investment Club service.
I provide Park Avenue Investment Club subscribers with current and valuable information that’ll get them ahead with their portfolios.
This is your chance to change your life.
All my best,
Founder, Park Avenue Digest
Charles cut his chops on the trading floor of the New York Futures Exchange before moving on to become a wildly successful money manager on Wall Street.
And with more than 35 years of recommending stocks under his belt, Charles has knocked the cover off the ball, compiling an amazing record of success and posting gain after gain for his loyal readers. He is the founder of Park Avenue Investment Club and the Insider Alert newsletters.
Charles is also the author of the highly acclaimed book, Getting Started in Value Investing.
1 To see what I’m talking about, go to The Verge. It compiled “11 weird and awkward moments from two days of Mark Zuckerberg’s Congressional hearing.”