After enjoying a surge this year, the social media stocks seem
to have hit the brakes. These stocks have fallen out of favor with
investors in recent weeks, mainly because many companies in the
space failed to impress with their Q3 numbers or gave a lackluster
guidance. Plus recent gains in these stocks reflect lofty
valuations and raised concerns about a potential bubble in the
space This happened markedly when Twitter (
) made its debut as a public company on November 7.
After making a sizzling IPO launch and hitting $50 in its first day
of trading, Twitter has started to stabilize around $41. It is
still up around 58% from the IPO price of $26 (read:
Is Twitter Owned by Your ETF?
The listing of Twitter appears to have taken some shine out of the
other social media stocks. The shares of high-profile social media
stocks such as Facebook (
), Yelp (
), LinkedIn (
) and Groupon (
) plunged 11.67%, 8.94%, 7.38% and 6.22%, respectively, over the
trailing one month. This indicates a broad sell-off in this corner
of the market which had recently become the darling of investors.
Given the disappointing performance of the stocks and another
bubble talk, the only pure play ETF tracking the performance of
social media companies -
Global X Social Media Index ETF (
- lost nearly 3.62% over the trailing one-month period. This is in
contrast with the gains of 2.33% for the broad technology fund (
) and 2.69% for broad U.S. market fund (
However, the fund is still up over 48% year-to-date (read:
3 Sector ETFs Crushing the Market in 2013
Social Media ETF in Focus
The ETF tracks the Solactive Social Media Index, which measures the
performance of companies involved in the social media industry,
including companies that provide social networking, file sharing
and other Web-based media applications.
In total, the product holds 28 securities in the basket and puts
more than 70% of assets in the top 10 firms. This suggests heavy
concentration and dominance of the top 10 holdings. The top three
holdings - Tencent Holdings, LNKD and Sina Corp - together make up
for about 30.5% of the total assets (see:
all the Technology ETFs here
The fund is evenly split between mid and large caps while small
caps account for 13% share. Further, the ETF is tilted toward
growth securities as these make up for 63% share. In terms of
country exposure, U.S. firms take more than half of the portfolio,
closely followed by China (26%) and Japan (7%).
The product has gathered over $92 million of capital this year,
propelling its total asset base to $105 million. Volume is good as
it exchanges more than 125,000 shares in hand on average daily
basis. The ETF charges 65 bps in fees and expenses.
The recent slide in the social media stocks and the ETF seems to be
short-lived as Internet usage in the U.S. and abroad is increasing
and a large share of that time is spent on social media sites. This
suggests good trading ahead for the product in the coming months.
Further, SOCL has a Zacks ETF Rank of 2 or 'Buy' rating with 'High'
risk outlook. Moreover, at the time of writing, all the four Zacks
industries that are under the social media industry have Zacks
Ranks in the top 45%, suggesting more upside potential heading
toward the New Year (read:
3 Biggest ETF Winners from the 3rd Quarter
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FACEBOOK INC-A (FB): Free Stock Analysis Report
GROUPON INC (GRPN): Free Stock Analysis Report
LINKEDIN CORP-A (LNKD): Free Stock Analysis
GLBL-X SOCL MDA (SOCL): ETF Research Reports
TWITTER INC (TWTR): Free Stock Analysis Report
YELP INC (YELP): Free Stock Analysis Report
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