Mutual Funds Hit the "Don't Like" Button on Facebook Shares
Mutual fund giant Fidelity Investments had dumped more than 1.9 million shares of Facebook last month, according to the Wall Street Journal
Twenty-one of their mutual funds were involved in unloading the highly beleaguered shares. Moreover, sixteen funds sold 25 percent of their stake in Facebook, reported WSJ.
According to Morningstar U.S. stock funds median holding period for investments is 22 months. However, the Facebook shares were only held for 6 weeks. A Fidelity spokeswoman told WSJ, "Our managers are not tied to a minimum holding period and need to be able to respond to changes in market conditions."
Fidelity Puritan fund was the company's largest seller, unloading more than 630,000 shares of Facebook. The fund's average retention period is 8 months.
It is yet to be determined if Fidelity has made or lost money on the Facebook investment. The company had been one of the first institutional investors in the startup, which most assuredly got in at a fraction of Facebook's $38 to $42 a share IPO range, according to WSJ,.
Facebook shares have disappointed investors from its NASDAQ debut, which has been characterized as nothing short of a debacle.
Fidelity is not alone in its dissatisfaction with sinking Facebook shares. Turner Investment Partners' Large Growth fund bailed out on 28 percent of the fund's Facebook holdings and Oppenheimer Funds Inc's Global Allocation fund sold 10 percent of its shares, according to the WSJ.
Fund managers are finding it more difficult to maintain profits over of a sustained period. The economic environment has not been favorable for the buy and hold strategy. Hedge fund manager, Louis Bacon recently said in a memo to investors. “It is hard to figure out how to invest when actions taken by politicians can affect financial markets more than basic economic factors.”
Investment funds and index funds likely feel compelled to participate in highly publicized IPO's, such as Facebook. However, when stocks perform poorly, fund managers must quickly decide how that loss will affect the overall performance of the fund.
Facebook represented a the relatively small portion of the aforementioned funds' holdings. Still, Fidelity Insight editor John Bonanzo told WSJ, “It seems they ultimately decided that they don't like what they see.”
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.