With great promise comes great expectations, and as a publicly traded company Facebook (FB) has yet to deliver. As of midday trading on Monday August 20th, Facebook stock traded around $19 a share - a 50% drop since its launch. Some feel that Facebook's initial price of $38 reflected too much hype and not enough financial reality. Others feel that a global brand like Facebook is now at or near an attractive valuation. Whatever the case, many investors are holding off on investing in Facebook until share prices settle. However, for those investors who still want exposure to the technology sector, there are a few attractive options to consider.
The most likely solution is to consider the low cost (18bps) Technology Select Sector SPDR (XLK). It's the best performing technology ETF this year gaining over 15.5%. XLK owns "stocks primarily covering products developed by internet software and service companies, IT consulting services, semiconductor equipment and products, computers and peripherals, diversified telecommunication services and wireless telecommunication services are included in this Index. One word of caution, though, to investors weary of single-stock investing, XLK currently has a 20% weighting in Apple (AAPL).
The concentration level in XLK may point some investors to another solution, the PowerShares NASDAQ Internet Portfolio (PNQI). Its largest holding is EBAY, amounting to only 9.01% of its assets. This ETF seeks to own "the largest and most liquid U.S.-listed companies engaged in internet-related businesses and that are listed on one of the major U.S. stock exchanges." Thus, its portfolio has a group of top holdings that might be considered peers with Facebook including Amazon (AMZN), Google (GOOG), Baidu (BIDU) and Priceline (PCLN). At a 60bps expense ratio however, PNQI may be too rich for some portfolios. Even so, PNQI is the third best performing technology ETF this year with gains of 12.4%.
Finally, there are investors who may want limited exposure to Facebook based on its future promise or new found valuation. For those investors, the ETF to consider is the Social Media ETF (SOCL) from Global X. This ETF seeks to own "companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications." With a Facebook weighting of just over 5% currently, SOCL is the ETF with the purest exposure to Facebook and the rest of the social media sub sector. Accordingly companies including Linkedin, Google and Tencent are some of its top holdings. SOCL has lost over 6% of its value in 2012 while sporting a .67bps expense ratio.
Here's a NASDAQ.com graph displaying Facebook's performance from its May 18th launch versus technology ETFs like XLK, PNQI and SOCL.
Facebook's current slide could end tomorrow or it could last a lot longer. For those investors suffering Facebook fatigue, technology ETFs may be a better solution. While these ETFs won't offer concentrated Facebook exposure, they will provide a diversified basket of holdings along with exposure to the sector. That diversification, and lower volatility, should offer an attractive proposition to Facebook-shy investors - and a better night's sleep.