There are some sectors that are sometimes more or less immune to the overall market conditions. Social Media and Internet Services are a few of those niche technology sectors this year that were largely unaffected by global economic uncertainties, the Fed's hiccups on pulling back on QE3, or the white house's debt drama. Over the last four months, key Social Media stocks such as Facebook (NASDAQ:FB) and LinkedIn (NYSE:LNKD) have outperformed the broad S&P 500 index significantly.
Internet value-added services (IVAS) leader Tencent Holdings Limited (OTCPK:TCTZF), which provides mobile and telecommunications value-added services (MVAS) primarily in China and the United States, is up 42% since Q3'13 and 59.3% YTD. Another online media company, Sina Corporation (NASDAQ:SINA), is an online brand advertising portal, based in China, and provides region-focused format and content. SINA more than doubled since July'13 and 30% YTD.
Now imagine an ETF that holds all of the above mentioned stocks. The Global X Social Media Index (NASDAQ:SOCL) ETF does just that and holds 46.3% in just these four stocks:
Asset Under Management: $95.5 million
Top Five Holdings:
- Facebook - 13.5%
- SINA Corp US - 11.8%
- Tencent Holdings - 11.8%
- LinkedIn - 9.2%
- Pandora Media Inc (NYSE:P) - 6.62%
As a result of the extremely good performance of these four stocks, SOCL also performed pretty well since the beginning of Q3'13 (38%) and during the year (56%). The ETF is going higher with strong momentum on significantly higher average daily volume (118,500 since July'13 compared to 7,000 in Q1 and Q2 combined). As of this writing, the ETF is trading at 20.80 and any pullback in the ETF represents an opportunity to get exposure to this sector.
Style: Growth and Momentum
Potential: High - due to expected continuation of strong momentum in the underlying sector.
Cost: SOCL has an annual expense ratio of 0.65%. Given the strong potential, the expense ratio will have negligible impact on the total return.
Liquidity: Represents the ease of trading large blocks of stocks. As explained earlier, the average volume has increase significantly in Q3 compared to the first half of the year, representing a significant increase in liquidity.
Risks: The ETF has a beta of 0.91 with respect to the S&P 500. However, as mentioned earlier, nearly 46.3% of the overall FTF composition is concentrated in just four stocks and that may bring more company specific risks in addition to sector and market risks. At the same time, these four companies are well managed and have strong potential for further growth.
Disclaimer: The opinions in this document are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks/ETFs mentioned. Past performance of the stocks/ETFs discussed may not continue. The information in this document is believed to be accurate, but investors are encouraged to conduct their own due diligence before trading. I do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for their specific situation.