On above average volume the Global X Social Media Index ETF (NasdaqGM: SOCL) posted a gain of just under 1% Thursday.
That is of little compensation to investors that have dealt with SOCL’s 11% dive over the past month. Down more than 22% in just the past 90 days, the once high-flying SOCL entered a bear market, defined by a decline of 20% or more, several weeks ago. [Social Media ETF Flirts With Bear Market]
That is a stunning reversal of fortune for an ETF that surged almost 64% last year to rank as the seventh-best sector ETF of 2013, according to Dorsey Wright data.
As concerns about extended valuations have weighed on Internet and social media stocks have kicked in, an array of familiar names have weighed on SOCL. That group includes Facebook (NasdaqGS: FB) and LinkedIn (NYSE: LNKD), which combine for over 20% of SOCL’s weight. [Internet ETFs Hammered Again]
Facebook is down almost 12% in the past 90 days while LinkedIn has plunged 30.4% over the same time, entering a bear market of its own. The average 90-day decline for Groupon (NasdaqGS: GRPN), Pandora (NYSE: P), Twitter (NYSE: TWTR) and Yelp (NYSE: YELP) is a staggering 40%.
Only yelp is top-10 holding in SOCL, but those four stocks combine for over 15% of the ETF’s weight. “The combined market capitalization of Twitter, LinkedIn, Facebook Pandora, Yelp and Groupon reached $195.1 billion on Wednesday,”Joseph Ciolli and Trista Kelley report for Bloomberg.
Valuations on some of these names still remain despite the dramatic declines. For example, Twitter trades at 800 times estimated earnings while Pandora trades at 137 estimated earnings, making LinkedIn look cheap at a forward P/E of 87, according to Bloomberg.
SOCL’s P/E ratio is almost 30.6 with a price-to-book ratio of 3.35. By comparison, the PowerShares QQQ (NasdaqGM: QQQ), the NASDAQ-100 tracking ETF, has a P/E below 20.
It is not just U.S. stocks that are hampering SOCL. China’s Weibo (NasdaqGS: WB) has lost 11% since its April IPO. Sina (NasdaqGS: SINA), YY (NasdaqGS: YY) and Youku Tudou (NYSE: YOKU) are down an average of 18.6% in the past month. Along with Weibo, those stocks combine for about 13% of SOCL’s weight.
This year, the primary source of technology strength has come via old line companies such as Microsoft (NasdaqGS: MSFT) and Cisco (NasdaqGS: CSCO). Although those stocks, along with Qualcomm (NasdaqGS: QCOM) and Intel (NasdaqGS: INTC) are top-10 holdings in QQQ, that has not been enough to buffer the Nasdaq from declines in biotech, consumer discretionary and social medial stocks. [A Tech ETF for Grandad]
Global X Social Media Index ETF
Tom Lydon’s clients own shares of Facebook, Microsoft, Cisco and QQQ.