Investors Friend Facebook, but not the Social Media ETF

Here is a vexing scenario from the world of exchange traded funds and one that might be an ominous sigh regarding investor sentiment toward social media stocks not named Facebook (NasdaqGS: FB).

Year-to-date, shares of Mark Zuckerberg’s company are up nearly 40%. Conversely, the Global X Social Media Index ETF (NasdaqGM: SOCL), an ETF where Facebook is the third-largest holding at a weight of 10.1%, has tumbled 15.6%.

What gives? The easy (and accurate) answer is that Facebook’s 10.1% weight in SOCL has not been enough to buffer the ETF from weakness in some of its other marquee holdings. That situation has recently been worsening. For example, shares of Facebook are up nearly 2% over the past month, but SOCL has tumbled 7.5% over the same period. [An Important Week for the Social Media ETF]

SOCL’s one-month decline is nearly in-line with the 7.7% shed by LinkedIn (NYSE: LNKD), the ETF’s largest holding, over the same period. Trading more than 7% below its 200-day moving average, SOCL took out its October lows on Monday and with little in the way of support, the ETF’s chart indicates a fall to the May lows (also the ETF’s 52-week low) could be in the offing.

SOCL’s weakness is far from encouraging at a time when most U.S. large-caps are flexing their muscles.

With large cap U.S. indices hitting record highs on a daily basis, it is becoming easier to spot the areas of the market that aren’t participating. The one that stands out the most in my view is Social Media. A high-growth, high-profile industry that had huge outperformance in 2013, one would expect it to be posting similar gains in 2014,” writes Charlie Bilello on Yahoo Finance. “The question for investors is whether this weakness is merely temporary or perhaps an early indication that share prices and expectations have gotten ahead of fundamentals.”