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Internet ETFs & Stocks Top Bull Market: Will the Rally Continue?

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The S&P 500’s 10-year long bull run draws focus on outperformers, with tech stocks on a sizzling run. The technology sector staged a spectacular comeback from the 2008-2009 recession, with Internet stocks and ETFs hogging the spotlight.

The S&P 500, which declined about 47% from Mar 9, 2008 to Mar 9, 2009, gained about 386.8% in the last 10 years (as of Mar 7, 2019). Though the tech-driven Nasdaq entered a bear market last December, glamourous internet ETFs breezed past the S&P 500 in a 10-year period (read: ETF Trends Seen in the 10-Year Old Bull Market).

Internet ETFs like First Trust Dow Jones Internet ETF FDN and Invesco NASDAQ Internet ETF PNQI added a stellar 952.4% and 854.9% during this time frame. Internet giants like Facebook FB, Amazon AMZN, Alphabet GOOGL, Netflix NFLX and Microsoft (MSFT - Free Report) returned about 343.6%, 2580%, 690%, 6256.4% and 832.3%, respectively, over the past decade.

What Made Internet Stocks and ETFs Sizzle?

Rapid increase of online activities worldwide has been one of the defining characteristics of the past decade. Thanks to improving developed economies and greater demand from emerging nations, the sector fired on all cylinders in this bull market.

The e-commerce wave has been helpful in lifting Internet stocks. Investors should note that even in a mature market like the United States, e-commerce growth has been stellar as it makes up about 14.3% of total retail sales in the country compared with 5.1% ten years ago. Apart from e-commerce, social media has been another booming space.

Will the Rally Last?

Future growth is likely to be sustained by several emerging markets and Asian economies. Some of the fastest-growing economies like India and 10 ASEAN members are expected to witness even faster growth rates for e-commerce and digital trade sectors, per a study by FICCI and consulting company KPMG (read: Why India ETFs Failed to Catch Up with Global Market Rally).

Specifically, India’s e-commerce market is anticipated to grow more than three times from 2017 to $84 billion by 2021 on higher use of smartphones and social media promotions. In 2017, global retail e-commerce sales came in at $2.3 trillion and it is projected to grow to $4.88 trillion by 2021, per Statista.

Per Statista, the number of monthly active social media users worldwide is expected to reach about 3.02 billion by 2021, “around a third of Earth’s entire population.” Further, AI has witnessed rapid evolution. In fact, AI, which contributed $2 trillion to global GDP last year, is likely to infuse as much as $15.7 trillion to the global economy by 2030, according to a recent report by PwC.

ETF & Stock Bets for 2019

Though overvaluation remains a concern in the Internet space, investors can still pick the following ETFs and stocks (read: Hedge Fund's Buy Dip in Tech Stocks: Follow Them With ETFs?).

ETF Picks

O’Shares Global Internet Giants ETF (OGIG)

The underlying O’Shares Global Internet Giants Index is rules based and intended to give investors a means of tracking stocks in the Internet sector that exhibit quality and growth characteristics. It charges 48 bps in fees.

SPDR S&P Internet ETF (XWEB)

The fund gives exposure to the Internet segment of the S&P Total Market Index. No stock accounts for more than 3.68% of the fund. It charges 35 bps in fees.

Stock Picks

Facebook Inc. (FB)

This Zacks Rank #2 (Buy) company operates a social networking platform worldwide.

Alteryx Inc. (AYX)

This Zacks Rank #1 (Strong Buy) company provides self-service data analytics software platform.

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