Apparently, the minute before the
Facebook (
FB
)
IPO was the high water mark for the broad social media industry, at
least so far in 2012. After that horrendous opening session for the
social media giant, the bottom appeared to fall out of the space,
not just in the networking segment, but in various other social
media companies as well.
Firms like
Zynga (
ZNGA
)
and
Groupon (
GRPN
)
have also succumbed to the panic and are now trading at or near 52
week lows, suggesting a broad level of disinterest in this once
investor darling corner of the market. Now, many other IPOs in the
segment are also being put on the backburner, as more companies
wait for a more friendly time to debut their shares out to the
general public (
see Three ETFs to Play the Tech IPO Boom
)
This negative trend has been especially devastating to one of
the only funds to target the space, the
Global X Social Media Index ETF (
SOCL
)
. The fund debuted in November of 2011 and appeared to be perfectly
timed to take advantage of the social media boom and the increased
investor interest in the space.
Initially, this was certainly the case as the ETF was one of the
most discussed products and was well on its way to a solid asset
base. Yet despite doing a great job of investing in a variety of
social media firms from around the globe, and being one of the few
funds to have a decent holding in FB, the product still has less
than $20 million in AUM as of right now as interest in the space
has evaporated seemingly overnight.
While investor curiosity over social media stocks has certainly
waned after the lackluster Facebook IPO, the real reason for
investor hate undoubtedly is due to the weak performance. In the
past three month period, SOCL has lost about 8.6% including a
roughly 10.6% slump in July alone. With such a rough track record
for the broad space it isn't that surprising to see that many
investors have abandoned the segment for the time being (see
Social Media ETFs: Time To Buy?
).
However, the past few sessions have witnessed something of a
reversal in the space, with many stocks and SOCL coming off of
their lows. In fact, SOCL has added close to 5.3% in the first
third of August, helping to cut deeply into the fund's longer term
losses.
Investors should also note that thanks to the recent
performances of many stocks in the sector, the cream of the crop
now accounts for some of the biggest holding percentages in the
fund, while a number of other large caps also occupy some of the
top spots, suggesting less volatility could be in the cards for
SOCL in the near future (read
Three Great Tech ETFs That Avoid Apple
).
For example,
LinkedIn (
LNKD
)
currently accounts for just over 12.2% of the fund, making in the
top component in SOCL. While much of this gain has been thanks to a
recent earnings report, the company is still up over 64%
year-to-date, implying a relatively long time frame of
outperformance.
Beyond this leader, SOCL also includes a nearly 5.7% allocation
to GOOG, while it has just under 4% combined in the increasingly
weak duo of Zynga and Groupon. While a large reason for their small
holding percentages is clearly due to their terrible performances,
this small weight could be great news for those who are thinking
about getting in now and want low levels of exposure to these
uncertain companies.
So while social media has been an extremely weak sector as of
late, some metrics may be starting to come down to more reasonable
levels, especially since some companies have now proven to be
winners in the market (see more in the
Zacks
ETF Center
).
Furthermore, given the recent bout of strength in SOCL, which
decisively moved the fund off of its all-time lows, we may have
witnessed a near-term bottom for the fund, making now an
interesting entry point for investors with a long time horizon, a
desire for broad social exposure, and the willingness to take on
significant risk.
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@Eric
Dutram
on Twitter
FACEBOOK INC-A (FB): Free Stock Analysis Report
GROUPON INC (GRPN): Free Stock Analysis Report
GLBL-X SOCL MDA (SOCL): ETF Research Reports
GLBL-X SOCL MDA (SOCL): ETF Research Reports
ZYNGA INC (ZNGA): Free Stock Analysis Report
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