The sum of Facebook’s parts would be more valuable if it was to be broken up as a result of the ballooning political risk faced by the social media giant, according to head of US equities at Artemis Investment Management Cormac Weldon.
Weldon, who manages the Artemis US Equity, Select and Smaller Companies funds, said a split would improve the profitability of Facebook's businesses, such as WhatsApp, and he would "probably" own more of the firm overall as a result.
Speaking to Investment Week, Weldon said Facebook and other FAANG stocks are "going through a period of political difficulty", with governments increasingly concerned about the firm's influence and its digital privacy policies.
As a result, he explained, Facebook could face regulatory intervention, including being forced to split up its business. If the latter were to happen, Weldon added, the overall business would be worth more.
He said: "Instagram, which is a great asset, WhatsApp and Facebook Messenger - Facebook has only just started to monetise those.
"There are precedents globally, like TenCent's WeChat platform in China, where the equivalent of WhatsApp are being monetised."
Facebook occupied just 1.6% of Weldon's £1.4bn US Select fund at the beginning of May this year, according to FE, and Weldon said that figure would likely be greater overall in the event of a break-up.
Revelations in 2018 about Facebook's relationship with Cambridge Analytica contributed to a 15% fall in its share price as some investors feared the regulatory ramifications. The share price has since more than recovered.
Weldon, whose fund sold out of the stock during the period, said the recovery was attributed to "the base of the business continuing to perform extremely well", and users refusing to "abandon" Facebook.
Underweight large caps - with exceptions
The Select fund has maintained an underweight exposure to large-cap firms as Weldon said it is "difficult for very large companies to differentiate themselves within the market that we are operating in", where "interest rates are very low, inflation is absent and global economic growth is slowing down".
The fund therefore has a bias towards "smaller companies that can grow at a faster rate, produce better returns or be more innovative", he added.
Two notable exceptions in the funds top five holdings, however, are Microsoft and Amazon, which represent 6.1% and 4.7% of the portfolio respectively, according to FE.
Weldon said the fund's largest holding, Microsoft, "is one of the exceptions", as it offers a "high degree of predictability" through its "old" business, as well as the ability to "grow rapidly" though its cloud business. Similarly, Artemis' US equities team believes Amazon "has got a lot of growth ahead of it", he added.
The US Select fund, which was launched in September 2014, has delivered returns of 14.6% and 74% over one and three years to 21 July, respectively. The IA North America sector has averaged returns of 8.4% and 48.2% over the same timeframes.