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February 2017

Investment insights

Twitter: the harsh truth of post-truth?

by Claire Dwyer, Fidelity Personal Investing 
 
Not even the patronage of Donald Trump could spare Twitter’s share price yesterday as the company published its lacklustre quarterly results.
 
Disappointing ad sales, management turnover and sluggish user growth weighed on the performance of the California based company, with results coming in below consensus Wall Street estimates. The firm’s net loss hit $167m, up from $90.2m.        
 
Having nabbed its spot as the prime social networking battleground during the US presidential election, there were few clues to the man on the street of its less than rosy fundamentals. 
 
While barely a day has gone by without high-profile members of the Twitterati dominating the news agenda, the company has been battling challenges of its own, with Anthony Noto, its chief operating officer warning of a more competitive environment for digital ad spending since mid-January.    
 
As social media continues to transmogrify it’s become clear that becoming a household name isn’t the same thing as turning a profit.
  
Fund managers often trumpet the merits of investing in what you know - and there is wisdom in that, but only up to a point.
Veteran investor Peter Lynch complained last year of his ideas on this subject being misquoted and misunderstood.
 
“I’ve never said “If you go to a mall, see a Starbucks and say it’s good coffee, you should go and buy the stock,” he says.
 
The key attributes to watch out for, he says, are things like high returns on capital, ample reinvestment opportunities and a long runway through either unit growth or price increases.
 
The common sense approach of buying what looks like a good business - one you walk into or buy from every day - is understandably beguiling, but beating the market just isn’t that easy and there are no shortcuts to investment success.
 
People come in all shapes and size, some are fit and some or not (….not always easy to tell) and companies are similar.
 
If you access the markets via a passive option that uses market indices where the company stocks in the index are weighted by their market capitalisation, you will always own more of the largest companies (which have done well previously) than the smallest companies (which could do well in the future). In short, passive investing gives you a high exposure to past winners.
 
Active managers pick the companies they believe are most likely to deliver the best capital growth and dividends rather than simply based on size. By scrutinising the financial statements and crucially meeting senior company management, professional investors can laser through outward appearances and work out what really lies behind a ‘global brand.’
 
 

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

Prior to making an investment decision, retail investors should seek advice from their financial adviser. This document has been prepared without taking into account your objectives, financial situation or needs.  You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise. 

© 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited. 

 

 

This website is intended to provide general information only and has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information and consider the relevant Product Disclosure Statement for any product named on this website before making an investment decision.

© 2017 FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340.
Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL limited.

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 ("Fidelity Australia"). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. Prior to making an investment decision retail investors should seek advice from their financial adviser. Please remember past performance is not a guide to the future. Investors should also obtain and consider the Product Disclosure Statements ("PDS") for the fund mentioned in this document. The PDS is available on www.fidelity.com.au or can be obtained by contacting Fidelity Australia on 1800 119 270. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider such matters before acting on the information contained in this document. This document may include general commentary on market activity, industry or sector trends or other broad based economic or political conditions which should not be construed as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be construed as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care no responsibility or liability is accepted for any errors or omissions or misstatements however caused. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity funds is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. References to ($) are in Australian dollars unless stated otherwise. © 2017 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International, and the Fidelity International logo and F symbol are trademarks of FIL Limited.