Social Media ETF Enters Bear Market Territory

While much of the decline in momentum stocks has been focused on the biotechnology sector, another industry group that has been torched this year is social media stocks.

The Global X Social Media Index Fund (SOCL) tracks a concentrated group of 27 global companies engaged in social networking, file sharing, and other web-based media applications.  The fund controls $128 million in total assets and charges an annual expense ratio of 0.65 percent. 

Some of the top holdings and household names in SOCL include: Facebook (FB), LinkedIn (LNKD), and Yelp Inc. (YELP) which have all declined significantly from their 2014 highs.  Since hitting a high on March 6, SOCL has now fallen more than 21 percent and is now trading at levels not seen since August 2013.  The fund recently sliced through its 200-day moving average and volume has been steadily increasing as well.

Social media names garnered a great deal of hype in 2013 with the successful IPO of Twitter Inc (TWTR) along with several other high profile buy-outs of smaller companies.  The new frontier of global communication and social connections has put a heavy burden on these technology companies to find unique ways to leverage their user base.  Emerging market countries and other hard-to-reach areas represent enormous growth potential if they can make further inroads into these areas. 

As a result, quarterly earnings announcements and investor conference calls are highly scrutinized for their ability to create profitable long-term growth paths for shareholders. 

Other similar ETFs that have also come under fire this year amid heavy exposure to social media stocks as well as online retailers are the PowerShares NASDAQ Internet Portfolio (PNQI) and First Trust Dow Jones Internet Index Fund (FDN).  Each of these ETFs offer more diversified technology exposure than a pure social media play. 

Right now, these high growth stocks have fallen out of favor and are being substituted for more defensive sectors such as utilities and consumer staples.  However, if we do see stabilization in prices along with positive earnings or new product announcements, these social media names may find themselves back in the limelight once again.