Refriending a Facebook-Heavy ETF

Late last month, social media giant Facebook Inc. (NASDAQ: FB) suffered its worst intraday loss as a public company after reporting disappointing second-quarter results, news that weighted on a slew of exchange traded funds with large Facebook allocations.

That included the newly minted Communication Services Select Sector SPDR Fund (NYSEArca: XLC). XLC had a weight of more than 20% to Facebook prior to the company’s earnings announcement.

“At the close of business on July 25, Facebook and Twitter were up 23% and 84%, respectively, outperforming the S&P 500 Index and the tech-heavy Nasdaq year to date,” said State Street Global Advisors (SSgA) in a recent note. “But once both companies reported disappointing quarterly user growth and weak growth projections, market reaction was swift and brutal.”

XLC is the first ETF dedicated to the new communication services sector. The new ETF tracks the Communication Services Select Sector Index and “seeks to provide precise exposure to companies from the media, retailing, and software & services industries in the U.S.,” according to State Street.

Still Heavy On Facebook

Even with Facebook’s recent swoon, the stock remains XLC’s largest individual holding at more than 19% of the fund’s weight. The two share classes of Google parent Alphabet Inc. (NASDAQ: GOOG) combine for more than a quarter of XLC’s roster.

“While the market may have reacted harshly to Facebook and Twitter, the Communication Services sector’s long-term prospects are still attractive. Companies that facilitate how we access information, consume content and communicate with each other stand at the center of the growing segments of the economy in today’s Information Age,” according to SSgA.