Though the technology sector has always been a hub for innovation and exponential growth, one sub-sector in particular has created plenty of buzz on Wall Street in recent years: social media. From Facebook to LinkedIn to Twitter, investors are seeing more and more of these social media companies become worthwhile investments.
In 2011, one issuer took the brave step to launch a product that taps into the alluring social media landscape. The Global X Social Media Index ETF (SOCL) got off to a rough start when it first launched. These days the fund has accumulated roughly $107 million in total assets under management.
In this piece, we’ll take a closer look under the hood of SOCL, examining its unique portfolio.
Global X’s Social Media ETF is currently the only fund to offer hyper-targeted exposure to social media companies. It tracks the Solactive Social Media Index, which invests in the largest and most liquid companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications.
Given the industry’s relatively short history, it is not surprising to see that SOCL’s resulting portfolio consists of only about 35 individual holdings. The fund features a nice mix of large- and mid-cap companies, as well as meaningful exposure to small-cap firms.
Furthermore, SOCL also offers international exposure. Half of SOCL’s portfolio consists of U.S.-based firms, while nearly 30 percent of the underlying companies are domiciled in China. Four companies are headquartered in Japan, two are from Russia and there’s one each from Germany and Taiwan. [See also the Technology Equities ETF Cheat Sheet].
A closer look at SOCL’s portfolio reveals several companies that may not exactly fit most investors’ idea of a “social media” company. According to the Merriam-Webster dictionary, social media is: Forms of electronic communication (as Web sites for social networking and microblogging) through which users create online communities to share information, ideas, personal messages, and other content (as videos).
Of course, not all the companies in SOCL really fit this description. There are only 12 companies that strictly fit into the “social media” definition. Combined, these companies account for just over 40% of SOCL’s total assets:
▪ Facebook (FB): This online social media giant allows users to create personal profiles, add friends, exchange messages, as well as post status updates and photos.
▪ LinkedIn (LNKD): This is a business-oriented social networking service, mainly used for creating and expanding professional relationships.