Report: Mutual Funds Not Wary Of Facebook

By David Cohen 

Facebook’s initial public offering may not have lived up to expectations on the Nasdaq exchange, with the stock slumping from its $38-per-share debut May 18 to approximately $32.25 at the time of this post, but that hasn’t stopped at least 160 U.S.-based mutual funds and exchange-traded funds from adding the social network to their mix.

The Wall Street Journal reported that research from Morningstar showed that funds run by Fidelity Investments, Morgan Stanley, and Oppenheimer & Co. were among those that bought Facebook shares in May.

The Journal pointed out that Facebook was an unusual purchase for some of those funds, as they usually focus on dividend-paying companies or low-priced stocks, and the social network does not fit into either category.

Morningstar Director of Fund Research Russel Kinnel told the Journal:

There’s pretty broad ownership right out of the box. You have to think that a chunk of those (fund managers) were doing so for a quick bounce that they didn’t actually get.

According to the Journal, more than 6.5 percent of the Morgan Stanley Focus Growth Fund was invested in Facebook at the end of May, and Castle Wealth Advisors Financial Planner Michael Kalscheur told the newspaper:

That’s a huge gamble. Are you really going to put an IPO as a top-five holding in a fund?

Fellow financial planner Rob Moody of Compass Advisors told the Journal:

I don’t see how any value mutual fund could buy (Facebook) because it was not value priced at all.

Readers: Are you surprised that Facebook is a part of the mix of so many mutual funds and exchange-traded funds?

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