Published October 30, 2012
If stocks could sport emotions, one that would be going stir crazy with the market closed the past days is Facebook (FB). Yes, the largest social media company is still down 42.3 percent since its May initial public offering and yes, plenty of investors remain cautious on the name.
In other words, some left Facebook for dead not long after it went public. On the other hand, the shares surged 15.5 percent last week as the S&P 500 and the Nasdaq tumbled. Hence why those that are long the stock are eagerly the return of normal market action on Wednesday.
The cautionary tale here is that one week does not necessarily make a trend. However, one week can help start a new trend and if last week says anything about Facebook, it might just be that some investors see value at current levels. Perhaps there is value. Morningstar says fair value for the stock is $32. It closed below $22 on Friday.
Even if the darkest clouds hanging over Facebook have passed, conservative investors may opt to gain exposure to the stock through ETFs rather than direct ownership of the shares. These are the best ETF avenues for Facebook exposure.
Global X Social Media Index ETF (SOCL) The $13.5 million Global X Social Media Index ETF is still the only ETF devoted exclusively to the social media space. Now almost a year old, SOCL is about far more than Facebook. The stock is the ETF's fifth-largest holding with a weight of 6.2 percent, but that is well behind the almost 13 percent allocation given to LinkedIn (LNKD) and not much more than the weights garnered by search engine firms Yandex (NASDA: YNDX) and Google (GOOG).
There have been times when SOCL and Facebook have not performed inline with each other, but the perception by some investors is that the ETF and the stock are joined at the hip.
SOCL is the answer to the trivia question "What was the first ETF to hold Facebook?" However, SOCL is not the largest ETF with Facebook exposure. That honor goes to the...
First Trust Dow Jones Internet Index Fund (FDN) Though the First Trust Dow Jones Internet Index Fund did not add Facebook as quickly as SOCL did, it was easy to see FDN would be a likely home for the social media company at some point. FDN is the king of the Internet ETF space with over $488 million in AUM. Facebook is the fund's seventh-largest holding with a weight of 3.63 percent as of October 26.
FDN has a larger weight to Facebook than it does LinkedIn and Netflix (NFLX), among others. While FDN is the largest ETF with decent Facebook exposure (there are large ETFs with scant exposure to the stock), it is not the ETF with the largest weight to the stock. The answer to that trivia question is the...
First Trust US IPO Index Fund (FPX) The First Trust US IPO Index Fund's name implies it is an IPO ETF, but it tracks an index that "is a rules based value-weighted index measuring the average performance of U.S. IPOs during the first 1000 trading days," according to First Trust.
What that means is not all of FPX 100 holdings are new. For example, top holdings such as Visa (V), General Motors (GM) and Dr. Pepper Snapple Group (DPS) are well removed from their IPOs. FPX did make room for Facebook at last rebalancing. Now the stock is the ETF's second-largest holding with a weight of almost 8.4 percent.
FPX rebalances quarterly and assuming the last rebalance occurred in late September, that is a case of good timing. Facebook is up 6.4 percent since September 27.
For more on Facebook and ETFs, click here.
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