Exchange Traded Funds (ETFs)

A Fund that Provides Exposure to Social Media

If, as Eric Schmidt says, the internet is indeed “the largest experiment in anarchy that we have ever had,” social media almost certainly plays a central role in this conundrum.

While politicians both in the United States and around the world endlessly debate the question of whether speech on social media should be regulated, social media companies, beyond the usual suspects of Facebook (NASDAQ: FB) and Twitter (NYSE: TWTR) still provide ample opportunities for investors.

The Global X Social Media ETF (NASDAQ:SOCL) currently is the only exchange-traded fund (ETF) available that can give a prospective investor access to this dynamic part of the global economy.

Specifically, SOCL focuses on providing investment results that generally correspond to the price and yield performance, before fees and expenses, of the Solactive Social Media Total Return Index. The ETF caps the weights of each pure-play social media position at 10% and the weight of non-pure play companies at 4.75%. However, the fund also underweights U.S. companies relative to international ones, since SOCL excludes American tech giants Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM).

Conversely, SOCL overweights companies from China, Japan and Russia.

Some of this fund’s top holdings include Twitter Inc. (NYSE: TWTR), Facebook, Inc. Class A (NASDAQ: FB), Tencent Holdings Ltd. (OTCMKTS: TCTZF), NAVER Corp. (KRX: 035420), IAC\InterActiveCorp (NASDAQ: IAC), Alphabet Inc. Class A (NASDAQ: GOOGL), NetEase, Inc. (NASDAQ: NTES) and Spotify Technology SA (NYSE: SPOT).

While these companies are mainly in the software & IT services sector (94.79%), this ETF has holdings in companies that are in the diversified retail (0.84%) and leisure products (0.41%) fields, as well. The fund currently has $140.66 million in assets under management and an average spread of 0.27%. It also has an expense ratio of 0.65%, meaning that it is relatively expensive to hold in comparison to other exchange-traded funds.

In terms of SOCL’s MSCI ESG Fund Quality Score of 1.92, it ranks in the 1^st percentile within its peer group and in the 2^nd percentile within the global universe of all funds in the MSCI ESG Fund Metrics coverage. This fund’s performance has been mixed in the long term. While it has only been down 4.01% over the past month, it jumped 2.80% for the past three months and remains up 16.30% year to date.

Chart Courtesy of stockcharts.com

In short, while SOCL does have several advantages over some of its peer funds and provides an investor with the ability to profit from the world that is social media, this ETF’s risks and costs are not zero. Thus, interested investors always should do their due diligence and decide whether the fund is suitable for their portfolios.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.