Recent Addition of Facebook Helps ‘Wide Moat’ ETF
July 25th, 2013 at 7:00am by Tom Lydon
Shares of social media giant Facebook (NasdaqGM: FB) were up nearly 20% in premarket trading Thursday in the wake of the firm’s blowout quarterly earnings.
If the rally holds up, it will represent the best one-day performance in the stock’s history. California-based Facebook reported an adjusted second-quarter profit of $488 million, or 19 cents per share, on revenue of $1.81 billion. Analysts were expecting EPS of 14 cents on revenue of $1.62 billion.
“We’ve made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile,”said Mark Zuckerberg, Facebook founder and CEO, in a statement.”The work we’ve done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future.
Facebook’s thumping of Wall Street estimates could benefit several ETFs, most of which are direct plays on Internet and social media stocks.
However, investors should not overlook the Market Vectors Wide Moat ETF (NYSEArca: MOAT) as an avenue for getting some Facebook exposure. MOAT tracks the Morningstar Wide Moat Focus Index, which is designed to focus on companies with distinct competitive advantages. [Wide Moat ETF Covers Firms With Competitive Advantages]
MOAT added Facebook shares in the recent quarterly reconstitution of the Morningstar tracking index.
At rebalancing, the index equal weights 20 holdings at 5% apiece, but Facebook is currently MOAT’s second-largest constituent with an allocation of 5.33%. Schlumberger (NYSE: SLB), the world’s largest oilfield services company, is the ETF’s largest holding at 5.58%. Other familiar names in the ETF include Warren Buffett’s Berkshire Hathaway (NYSE: BRK-B), National Oilwell Varco (NYSE: NOV) and General Electric (NYSE: GE). [An ETF Patterned on Buffett's Wide Moat Approach]
For MOAT shareholders, the impact of Facebook’s stellar quarterly results will be interesting to watch. The stock has only been part of the ETF’s underlying index since June 21. Since then MOAT, which has $269.1 million in assets under management, has gained 5.3%.
Facebook was part of a group of eight newly added stocks to MOAT’s index. Others included Schlumberger, Amgen (NasdaqGM: AMGN) and eBay (NasdaqGM: EBAY). Among the eight stocks that were removed were Intel (NasdaqGM: INTC) and Microsoft (NasdaqGM: MSFT).
Investors that are considering a move into MOAT on the back of the Facebook earnings report will also want to know what stocks are Morningstar’s watch list for possible inclusion in MOAT’s index. That group of 10 currently includes. Amazon.com (NasdaqGM: AMZN) and one of Buffett’s largest holdings, Coca-Cola (NYSE: KO).
Market Vectors Wide Moat ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Amazon, Coca-Cola, Facebook, GE, Microsoft and MOAT.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.