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Social media companies have gained immense popularly in recent years as this corner of the market represents one of the few growth opportunities left for developed market investors.
Internet usage continues to increase in both the U.S. and abroad, while a large share of that time is spent on social media sites.
It seems that the social media trend has reached a new level this earnings season, as most of the companies in the space reported robust results. Though most of these companies saw floundering stock prices last year that hurt the social media space globally, their recent performances are impressive to say the least.
For investors seeking to play this trend in basket form, there are a few options, most notably Global X Social Media Index ETF (SOCL). This product, buoyed by the solid earnings, has surged nearly 16.2% over the trailing one month and over 34% in the year-to-date time frame (read: 6 ETFs Beating the Market Over the Past Year).
However, despite this solid performance and the in-focus nature of the sector, the fund remains relatively unknown. In fact, the product has only amassed $11 million in assets and sees light volumes on most days.
Given this, it might be worth it to shed some light on this ETF and its holdings for those who are unfamiliar with the product, but are thinking about jumping in on the space. Below, we highlight some of the key details regarding SOCL and how recent earnings have led to this fund’s solid run.
SOCL in Focus
The fund 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 (see more in the Zacks ETF Center).
The ETF holds 27 securities in the basket, charging 65 basis points a year in fees. The product puts more than 74% of assets in the top 10 firms, suggesting heavy concentration and that the top 10 holdings dominate the returns of the fund. In terms of country exposure, U.S. firms take half of the portfolio, closely followed by China (28%) and Japan (13%).
Social Media Earnings in Focus
The torrid run in the SOCL share price was brought by the stellar earnings of Facebook (FB - Analyst Report) and subsequent surge in its stock price. FB shares soared nearly 50% last month and reached a new 52-week high of $38.31 on July 31. Most significantly, for the first time since its IPO, Facebook succeeded in crossing the psychological barrier of $38.00, the high end of its IPO price range.
The company’s focus on improving mobile exposure as well the stellar second quarter earnings helped the shares rebound over the next 5 quarters. FB takes the third spot in the fund’s basket with 11.15% share (read: 3 ETFs in Focus on Facebook's Earnings Beat).
Apart from FB, LinkedIn (LNKD - Analyst Report), the world’s largest professional network company, also reported better-than-expected earnings, beating the Zacks Consensus Estimate. Shares jumped by double digits after the earnings announcement and reached a new high of $237.96 on Aug 2. LNKD shares have more than quadrupled from the IPO price of $45.
This rally is also significant for SOCL as it allocates 10.18% of total assets to LNKD, which occupies the fourth position in the basket.
Further, Yandex (YNDX - Snapshot Report) also contributed to the SOCL upside. The share price of the Russia's top Web search provider has risen nearly 23% over the trailing one month on upbeat earnings and strong revenue guidance. The firm occupies the fifth position in the basket and represents about 6.03% of SOCL (read: Time to Avoid Russia ETFs?).
Beyond the incredible social media earnings, SOCL also got a boost from Groupon’s (GRPN - Snapshot Report) successful turnaround story since the beginning of 2013. The company is undergoing several changes to become more of an e-commerce company, suggesting optimism in the company’s growth and investors renewed confidence.
GRPN, one of the fund’s top 10 holdings accounting for 5.11% of SOCL, is up more than 79% this year as well. Plus, this firm also reported solid earnings for the most recent quarter, further confirming the trend in the space.
The impressive social media earnings this season suggest that the space is back on track as the ETF has been up more than the overall market in the past three months and the year-to-date period (read: 2 Sector ETFs Surging This Earnings Season).
And given the solid guidance that many companies in this space delivered, we could see additional gains in the months ahead too. So, for investors seeking a new play on the tech space, the relatively unloved social media ETF could be the ticket to close out 2013.
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