Data support the notion that SOCL is richly valued. The ETF has a P/E ratio of almost 38 and price-to-book ratio of 4.67, according to Global X data. The PowerShares QQQ (NasdaqGS: QQQ), the NASDAQ 100 tracking ETF, has a P/E of 18.6 and a price-to-book ratio of 3.6. Even the PowerShares NASDAQ Internet Portfolio (NasdaqGS: PNQI), which devotes a substantial part of its weight to expensive stocks like Facebook, Amazon (NasdaqGM: AMZN) and Netflix (NasdaqGM: NFLX), has a slightly lower P/E than SOCL at 36.
MarketPsych, a market psychology research firm, shows investor optimism in SOCL has already gotten too frothy and a near-term sell-off for the ETF could be in the cards, IBD report. Then again, Internet stocks have shown investors the shares can remain richly valued for extended time frames, making timing SOCL’s decline a tricky endeavor.
Global X Social Media Index ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of QQQ, Amazon and Facebook.