Breakout

There’s More to Social Media Investing Than Facebook, Groupon & Zynga

Breakout

Even in its diminished stature, Facebook (FB) is still two times larger than its three nearest rivals combined. As top-heavy as that may sound, the reality is that the largest social media site in the world is both tempting and treacherous.

Its size alone can be off-putting, especially for investors who believe the social media trend has just begun, especially in emerging markets like Brazil and China where internet penetration, at about 35%, is less than half what it is in the U.S.

In fact, within the Global X Social Media Index ETF (SOCL), Facebook is only the fifth largest position and only has a 6% weighting, says Bruno del Ama, CEO of Global X Funds, a family of 35 different ETFs.

"The Social Media Fund has obviously come down...but it has come down a lot less than some of its rivals," he says, pointing to its 20% drop from its annual high versus the 50-to-85% drubbing taken by Facebook, Groupon (GRPN) or Zynga (ZNGA) .

The fund 's outperformance can be attributed, in large part, to the fact that it is globally diversified, with no one position accounting for more than 10% and the top five holdings accounting for about 40% of the total assets. del Ama also points out that about 44% of the stocks are U.S. based, while about 40% come from Asia.

Other top picks include LinkedIn (LNKD) and the Chinese trio of Tencent, Sina and Ren Ren.

Few would debate whether a year from now there will be more people and businesses using social media than there are today. It's a trend that is already seeing companies such as Facebook trying to develop new ways to post ads and drive revenue.

All things considered, it makes for a fairly solid investment case del Ama says, who admits he's as confident on the sector today as ever, and perhaps even more, since valuation have gotten so much more attractive.

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