Meta Platforms Inc. (META) stock saw a huge falloff this week following a more than 50% decrease to its quarterly profits, driven by a precipitous drop to its digital advertising numbers. While many investors are questioning Meta chief executive Mark Zuckerberg’s significant investment in the metaverse, the social media firm offers a risky but intriguing opportunity to buy the dip with META ETFs.
Investors had good reason this week to be concerned about META following its loss of $3.7 billion on Reality Labs, the firm’s metaverse department. But markets, nervous about rising rates and the specter of a recession, also had the finger on the trigger to sell with the first headline earnings drop from the big tech names. Much like the China stock selloff earlier this week, emotions were part of the equation.
Reality Labs has posted some serious losses, but the division represents an investment in the future which could still pay off. META also plans to expand its data centers to support next-generation AI, for example, that could sharpen its digital advertising capabilities.
Investors should keep an eye on four META ETFs holding META at a minimum 10% weight that could rebound as the market’s take on the firm’s prospects levels out, starting with the Communication Services Select Sector SPDR Fund (XLC).
XLC tracks the S&P Communication Services Select Sector Index and lists META as its largest holding by weight at 16.2% as part of its large-cap growth focus. XLC charges just 10 basis points, with one-month returns beating the ETF Database category average by 4.7%.
The Vanguard Communications Services ETF (VOX) holds META at 11.1%, just behind Alphabet Inc.’s Class A (GOOGL) and Class C (GOOG) stocks at 22.8% combined weight. VOX tracks the MSCI US IMI 25/50 Communication Services Index, with a significant lean towards mega-cap companies which may benefit those interested in a sector rotation strategy. VOX also charges a 10 basis point fee and has seen $46 million in three month flows.
The cheapest of the four, the Fidelity MSCI Communication Services Index ETF (FCOM), holds META at 10.3%, also second to the combined weight of GOOG and GOOGL at 27%. FCOM charges just nine basis points to track the MSCI USA IMI Communication Services 25/50 Index including several video game and communications firms. FCOM has seen $20 million in net inflows over the last three months.
Finally, investors may also want to follow the Global X Social Media ETF (SOCL) as well, where META is weighted at 10.2% just behind Twitter Inc., (TWTR) which will no longer be publicly held following its purchase by billionaire Tesla CEO Elon Musk. SOCL tracks the Stuttgart Solactive AG Social Media Index and charges a 65 basis point fee for concentration in a few large firms providing social networking, file sharing, and other online media tools.
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