BOSTON -- Nabil Elsheshai jokes about wasting time on Facebook, but his surfing has paid off.
A senior equity analyst for Thrivent Financial in Minneapolis, Elsheshai had advised his firm not to buy Facebook's initial public offering last year at $38 a share due to concerns that it was overpriced.
But Elsheshai, 44, continued to use Facebook in his personal time, and this spring he noticed advertisements from companies such as eBay (EBAY) and automakers showing up on his "news feed," a centrally displayed part of the website.
After more quantitative research, he was convinced that Facebook was getting its advertising strategy in order. Elsheshai suggested to Thrivent it was time to buy the stock, advice that the faith-based firm followed in June. The $950 million Thrivent Large Cap Growth Portfolio (THLCX) bought 572,200 Facebook shares that month, according to Lipper data, a time when the stock was trading around $24.
Those bets looked prescient on July 24, when Facebook reported stronger-than-expected quarterly results and its shares shot up 40 percent in the following week to top $38 for the first time since the IPO. Facebook (FB) shares closed Friday at $38.50.
Thrivent's timely investment belie the challenges of investing in the world's largest social network.
Facebook's public offering was one of the most anticipated of 2012, but concerns about whether the company would be able to grow its mobile advertising business helped push down the stock to as low as $17.55 last September.
Kathryn Spica, a mutual fund analyst for Morningstar (MORN) in Chicago, said valuing Facebook has been a common problem for many fund managers. As with other young Web companies, it hasn't been clear how well the young company could monetize the heavy traffic to its site.
"It's an unusual stock. It's hard for the industry to get a grasp of how they'll make revenue," she said.
Elsheshai described Facebook as opaque and said his own impressions as a user helped give him confidence to act against what was fairly bearish commentary at the time.
He said the negativity had appeared to be mainly anecdotal, such as stories of teenagers switching to other social media services, but that didn't match his own experience or the data he saw.
"It seemed clear you were starting to see a broader set of advertisers" on the service, said Elsheshai, who is based in Minneapolis and has 462 Facebook "friends" at last count.
Another enthusiast for Facebook is Chris Carter, co-manager of the $549 million Buffalo Growth Fund (BUFGX), advised by Kornitzer Capital Management in Shawnee Mission, Kan.
The Growth Fund had bought Facebook shares last year and added to the position this spring on Carter's suggestion. It now holds around 370,600 Facebook shares, up from about 300,000 at the end of February, according to Carter.
Carter, 34, said he was encouraged by Facebook's strength in advertising on mobile devices, where the ads stand out compared to those that appear on desktop machines.
Seeing ads on the Facebook app on his own iPhone 5 helped inform his decision, said Carter, who has about 175 Facebook friends. "If I hadn't seen that, I would be wondering what's up," he said.
Not every investor relied on his own experience with Facebook. Jay Welles, a senior equity analyst at Manning & Napier in Fairport, N.Y., said he followed Internet tracking firms such as comScore (SCOR), which continued to report growing traffic to Facebook.
Welles recommended his firm buy Facebook shares in the spring, and said it hasn't sold them since.
"We felt the user base was very sticky. Facebook had a lot of hooks into the users," said Welles, 35. He uses LinkedIn (LNKD) but not Facebook. "My own personal experience isn't the relevant factor," he said.
The $1.2 billion Manning & Napier Equity Series (EXEYX) fund held 442,520 shares of Facebook at the end of July, up from 198,660 at the end of April, according to the firm's website.
The 20 Most Valuable Brands In The World
Wasting Time on Facebook a Boon for Some Investors
Brand Value: $27.8 billion
Percent Change v. 2012: 34%
What Happened: MasterCard's rank flew up nine spots this year to the 20th most valuable brand in the world, and Millward Brown VP Oscar Yuan attributes that ascent to "the growth of mobile technology." As consumers up their online shopping habits, brands like Mastercard and Visa reap the rewards for offering noncash payment methods.
Brand Value: $34.36 billion
Percent Change v. 2012: 34%
What Happened: "They're really into the big data," Yuan explained of the German tech brand, "So [the increase in value] is reflective of a consistent storyline: The growth of mobile shopping." SAP has the big data solutions enterprise companies need.
Brand Value: $36.2 billion
Percent Change v. 2012: 5%
What Happened: Walmart, however, has mastered the art of brick and mortar shopping. "You can't buy milk online," Yuan said. The retail giant has a large and loyal consumer base that is constantly growing - even internationally.
Brand Value: $39.7
Percent Change v. 2012: -8%
What Happened: Vodafone's 8% drop in value can be attributed to O2 and Orange's recent success. But at almost $40 billion, it is still one of the largest mobile carriers in the UK.
Brand Value: $41.1 billion
Percent Change v. 2012: -1%
What Happened: While Americans might have never heard of the Industrial & Commercial Bank of China, Yuan explains that in its home country, "the logo is ubiquitous." ICBC is the first of two Chinese brands in the top 20, a number which is largely due to the countries growing middle class.
Brand Value: $42.7 billion
Percent Change v. 2012: 15%
What Happened: "I think a lot of the growth is really tied to several consumer trends - and I'm talking about the need for consumers to shop online mobile devices," Yuan told BI. Consumers need to get the products they bought on the internet somehow, and that's where UPS comes in.
Brand Value: $45.7 billion
Percent Change v. 2012: 34%
What Happened: It's almost impossible for brick and mortar shops to compete with Amazon's wide selection, low prices, and mastery of the mobile marketplace - easily allowing consumers to buy anything from anywhere on their phone or tablet. Recent acquisitions of Audible.com and Goodreads also show the company's determination to dominate all aspects of mobile book consumption and sharing.
"There's no stopping amazon as they go international," Yuan said."
Brand Value: $47.7 billion
Percent Change v. 2012: 20%
What Happened: After acquiring Wachovia in 2008, Wells Fargo successfully expanded from a California-based bank to a national name. Coming from California also helped Well's Fargo's image with consumers considering that it was one of the few banks to remain unscathed during the financial crisis. "It also started a major rebranding strategy expansion," Yuan said.
Brand Value: $53 billion
Percent Change v. 2012: 8%
What Happened: Verizon got a boost after Apple opened its services to carriers other than just AT&T. While Verizon and AT&T's rivalry heats up, Yuan predicts that the competition will up both brands' game. "As data devices continues to proliferate, we will continue to see Verizon do well," he said.
Brand Value: $55.3 billion
Percent Change v. 2012: 21%
What Happened: "GE ... continued to be one of the most well respected consumer and industrial brands in the world," Yuan said. And the public is starting to see that it makes more than just light bulbs. General Electric has dedicated major marketing dollars to making sure that consumers know it produces everything from airplane engines to wind turbines to medical equipment. Hammering in its dedication to innovation, a recent ad campaign even enlisted the help of famous robots.
"In terms of B2B, GE is one of the most well respected brands," Yuan continued, citing that it was often used in business school case studies.
Brand Value: $55.4 billion
Percent Change v. 2012: 18%
What Happened: China Mobile is the largest mobile carrier and brand in China, so it's a no-brainer that it's one of the most valuable brands in the world. "There are more mobile phone subscribers in China than in the U.S.," Yuan said.
Brand Value: $56 billion
Percent Change v. 2012: 46%
What Happened: A key way to bolster global presence is to sponsor the Olympics. But that's not the only thing that upped Visa's brand value so drastically. As one of the most trusted names in non-cash payments, Visa has gained clout in the world of online shopping and mobile payments.
Brand Value: $69.4 billion
Percent Change v. 2012: -6%
What Happened: Marlboro is a top 10 regular, which goes to show that even though smoking is restricted in the U.S. doesn't mean that the rest of the world has laid off the habit. "Marlboro has consistently invested in the brand ever since its inception," Yuan said. "The rugged cowboy is very strong and consistent globally."
To put it another way, "about 25% of world's population are smokers, and they use it 5 to 10 times a day. I don't drink 10 bottles of water a day." That's getting your brand out there.
Brand Value: $69.8 billion
Percent Change v. 2012: -9%
What Happened: As a $70 billion brand, Microsoft is in great shape even in spite of a 9% value decrease. Microsoft is a powerhouse and has a reputation as one of the strongest tech brands in the business. But, Yuan notes, "with consumers, there's confusion as to where Microsoft fits." The company's fortune is largely tied with the PC business, but it has emerged on the mobile scene with the Surface and other devices. The company went through a major rebranding in the summer of 2012 to stay relevant.
Brand Value: $75.5 billion
Percent Change v. 2012: 10%
What Happened: AT&T is another company to gain value due to the increasing U.S. consumption of mobile products. For a long time, the service provider had an exclusive deal with the iPhone, so it became synonymous with the new technology. What's really interesting, however, is that even when Apple opened the iPhone up to Samsung and T-Mobile, AT&T's value didn't go down.
Brand Value: $78.4
Percent Change v. 2012: 6%
What Happened: "What's consistently impressive about Coca-Cola is its ability to innovate," Yuan said. "People think that soda consumption is declining, but Coke is turning the business on its head." For example, this year Coca-Cola released a series of freestyle machines which allows consumers and retailers to mix their own flavors of the soda syrup to make their own individual Coca-Cola. The company is constantly innovating and staying fresh.
Brand Value: $90.3 billion
Percent Change v. 2012: -5%
What Happened: Yuan noted that one of McDonald's gifts was the ability to listen to consumers' sentiments and adapt, particularly to growing health concerns. "It has come out with a much healthier menu with apple slices, oatmeal, and a Chicken McWrap which has done well," he said.
McDonald's is also gaining a stronghold in the coffee space, which should be an interesting new endeavor to follow.
Brand Value: $112.5 billion
Percent Change v. 2012: -3%
What Happened: At $112.5 billion, IBM's three percent value decrease is not a substantial figure. IBM is known as a company that consistently delivers year after year, Yuan told BI. And it is particularly hailed in the B2B sphere.
Yuan also noted that its Ogilvy-made "Smarter Planet" campaign, in which the company explained its plans to help clients innovate and make the world a better place, inspired consumers to believe in the brand.
Brand Value: $113.7 billion
Percent Change v. 2012: 5%
What Happened: Google has effectively taught consumers that it is more than just a search-based company. With maps, mail, shopping, and more, Google is integrated into everyone's lives. The company also made recent headlines about its new contribution to the hardware world in the form of Google Glass. "It will be interesting to see how Google Glass will contribute to the brand value, but now it's too soon to tell," Yuan said.
Brand Value: $185 billion
Percent Change v. 2012: 1%
What Happened: In spite of harsh Wall Street analysis and media speculation regarding Tim Cook's leadership capabilities, Apple continues to be a strong brand in the eyes of consumers - a major value measurement for Millward Brown. "Despite what the press says and stock market says," Yuan noted, "Apple in the eyes of the consumers is the gold standard."
In the last eight years, Apple's value has increased 1,045% - only topped by Subway's meteoric 5,145% rise. (Although Subway still hasn't broken the top 20.)
Those companies are constantly innovating to stay on the top.[Those companies are constantly innovating to stay on the top.]The gay pride Oreo, from Kraft's Facebook page.