ETF Providing Shelter From Social Media Storm (SOCL, GRPN, LNKD)

Earlier this year, it was noted, not surprisingly we might add, that ETFs have a tendency to lag the performances of their best constituents. Following that assertion, precious little attention was given to the usefulness of ETFs as a way of not taking it on the chin when an individual stock's story turns sour. Take the Global X Social Media Index ETF SOCL as one example. Year-to-date, the often-maligned SOCL is up 16.5%, a run that has been no doubt fueled by the meteoric rise of LinkedIn LNKD. The social networking site for professionals is SOCL's largest holding with a weight of 11.7% as of April 2, 2012. Put another way, SOCL has been a good way for investors to take part in the LinkedIn surge. Whether it's LinkedIn moving higher or lingering enthusiasm for the Facebook IPO that is still a month or two off, it is clear that SOCL has started to gain some traction with investors. When we last looked at the ETF on March 21 SOCL had almost $9 million in assets under management. As of April 2, that number rested at $11.5 million. Beyond those superlatives, SOCL has shown some fortitude in recent days as daily deal purveyor Groupon GRPN has been slammed. Shares of Groupon have experienced a double-digit plunged in the past five days. Maybe it's because they're both branded as "social media" stocks, but online game developer Zynga ZNGA has some positive correlation to Groupon and that stock has fallen over 4% over the same time. Factoring in Tuesday's decline, SOCL is down just 1.3% over the past five days and that may be an indication that sellers aren't targeting SOCL as a way of unleashing some social media aggression. According to Finviz data SOCL is not shortable, but it does have options trading on it. Options data courtesy of OptionMonster show little activity across the April and May SOCL strikes. Zynga and Groupon combine for just 6.7% of SOCL's weight, so it can be said that Groupon (2.12% of SOCL's weight) could disappear tomorrow and the impact on SOCL would be minimal. That could prove to be accurate, but the scenario also underscores the usefulness of ETFs as a way for investors to get exposure to a promising, yet relatively unproven industry while not having to make a bet on a single stock story. Social media is undoubtedly enticing as an investment theme, but for those that don't want to plunk down over $100 on LinkedIn or risk bottom fishing with the likes of Groupon, than maybe SOCL is the best option.