Still Like Facebook? There’s an ETF for That.
By: Investors who have not been spooked by Facebook’s tumultuous market debut will be able to get exposure to the social networking giant through an exchange-traded fund starting Friday.
Facebook is slated to become part of Global X Social Media Index ETF, following five trading days after the IPO.
Facebook’s weighting has not been set yet, but it is expected to be between 8 to 10 percent of the ETF's assets.
The fund, which charges annual expense fee of 0.65 percent, is designed to track the performance of fast-growing social media companies in the U.S and abroad. Among its holdings are LinkedIn , Pandora and Groupon — all of which became publicly-traded recently.
The fund has a heavy exposure to foreign companies, with China-based firms comprising 36 percent of its assets.
So far this year, Social Media ETF trailed the broader stock market. Since its inception last November, the fund has underperformed S&P 500, down 9 percent versus a positive 4 percent.
Morningstar ETF analyst Robert Goldsborough expects to see a big interest in SOCL once Facebook is added, despite the company’s disappointing market performance so far.
“While the hits that Facebook has taken this past week have probably dissuaded lots of investors from the company, I find it hard to believe that no investor wants to invest in Facebook — whether directly or via an ETF,” says Goldsborough.
Goldsborough doesn’t think that addition of Facebook will make the fund more volatile or will change the funds suitability for investors.
“In some regards, given how large Facebook is compared to the market caps of some of SOCL’s other holdings, it's conceivable that it could even be more stable with Facebook in it — once all the immediate post-IPO buying and selling dies down,” says Goldsborough.
In his initial note to clients last fall, Goldsborough said that "given SOCL’s very narrow focus, it is only suitable as a satellite holding". Moreover, “many companies contained in this ETF have gone public with extremely lofty valuations, according to Morningstar's equity analysts,” the note said.
Meanwhile, Facebook’s stock is still struggling to find its footing. Wednesday was the first day the company traded in the green following its IPO last week. It remains well below the offer price of $38, however.
Paul Hickey, co-founder of research firm Bespoke Investments, said on CNBC Wednesdaythat more than 75 percent of Bespoke readers wouldn't touch Facebook at a price above $25, according to the firm's recent poll.
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