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A portfolio manager at a $991 billion firm shares which of the tech giants face the biggest regulatory risks (FB, AAPL, GOOGL, NFLX)
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- Facebook and Google face bigger regulatory risks than Amazon, according to David Eiswert, the portfolio manager of T. Rowe Price's Global Stock Fund.
- Top lawyers from Facebook, Twitter, and Google appeared in Congress in November to answer questions about Russia's meddling in the 2016 US presidential election.
- Facebook's advertising platform is "like a wide-open Wild West," Eiswert said.
The largest online platforms have come under intense scrutiny about how their sites were used and abused before the 2016 US presidential election.
But even though investors have coined a convenient acronym for Facebook, Amazon, Apple, Netflix, and Google — FAANG — they're by no means lumping their risks together.
"The giants that I am more concerned about than Amazon are Facebook and Google," said David Eiswert, the portfolio manager of the $950 million Global Stock Fund at T. Rowe Price, which manages $991 billion.
"Apple and Amazon don't monetize through selling private data," he said. "Apple sells iPhones; Amazon delivers customer service."
In November, top lawyers from Facebook, Twitter, and Google appeared before the congressional intelligence committees to answer questions about Russia's meddling in the 2016 US election. Facebook, for example, had found evidence that fake accounts, most likely run from Russia, bought thousands of ads during the presidential campaign.
So it's no surprise that these are the companies directly in the crosshairs of regulators.
"You've created these platforms, and now they are being misused," Democratic Sen. Dianne Feinstein of California said at the November hearing. "And you have to be the ones to do something about it, or we will."
In October, senators introduced a bill to require online platforms with at least 50 million monthly viewers to keep a public log of ads bought by individuals or groups that spend more than $500 over one year.
"I think Facebook's EBIT" — earnings before interest and taxes — "margins are too high, and those returns represent a company that is just like a wide-open Wild West: Anybody can come on there and through an automated platform, buy ads, and target whatever they want and spew whatever evil stuff they want to do," Eiswert said.
Critics are asking why free services like Facebook and Google can't be regulated like radio or broadcast TV, Eiswert said.
Amazon, which Eiswert describes as a stock every long-term investor should own, is not completely off the hook. Its most prominent critic is none other than President Donald Trump, who has said the company is "doing great damage" to other retailers and making the US Postal Service "dumber and poorer."
But Eiswert sees Trump's regulatory influence over Amazon as limited.
Another trait that distinguishes Amazon from the other tech giants, Eiswert said, is that it is constantly investing to grow its business.
"We think there's potential over the long term to have much higher returns because their dominance increases as they grow," he said.
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