On the ETF front, the pure-play Global X Social Media Index ETF (SOCL) is rated “underweight” by S&P Capital IQ. The fund has zoomed more than 45 percent year-to-date, thanks to such top 10 holdings as LinkedIn, Facebook, Pandora Media and Google. Twitter was added to the portfolio last week. The fund has attracted $105 million in assets, and roughly half of the portfolio is in overseas stocks.
S&P Capital IQ’s ETF research director Todd Rosenbluth said the fund gets an “underweight” rating in large part due to valuation concerns among its holdings. He also discussed a couple of other ETFs with significant holdings of social media companies.
The First Trust Dow Jones Internet Index Fund’s (FDN) portfolio of Internet stalwarts includes Google, Facebook and LinkedIn. Its asset base is $107 billion and its expense ratio is 0.60 percent, or five basis points less than SOCL. It’s up 41 percent year-to-date, but S&P Capital IQ gives it an “underweight” rating because many of its holdings are considered overvalued.
“When you combine that with what we think are below-average quality rankings and scores for risk, this is why we’re not favorable on FDN,” Rosenbluth said.
S&P Capital IQ thinks slightly more highly of the First Trust U.S. IPO Index Fund (FPX), which follows an index that tracks the largest, most liquid companies that began trading in the last 1,000 days, adjusted quarterly. The fund is diversified across many different sectors, and its most recent top holding is Facebook. The fund’s market cap is $286 million, sports an expense ratio of 0.60 percent, and has returned more than 36 percent so far this year.
S&P Capital IQ has a lukewarm “marketweight” rating on this ETF, mainly because it feels the stocks within the portfolio generally are risky.
On a more positive note, Rosenbluth mentioned a couple of ETFs where Facebook is a top 10 holding and which he believes offer more favorable exposure to some of the major tech-related themes in the market––the iShares U.S. Technology ETF (IYW) and the Vanguard Information Technology ETF (VGT)
“We don’t like the pure-play ways to get exposure to social media, but we do think the more diversified ETFs from iShares and from Vanguard, in particular, are good ways to get exposure to it,” Rosenbluth said.