This Year's Hottest Stocks Reside In Small ETFs
Facebook (NASDAQ: FB), LinkedIn (NYSE: LNKD), Tencent Holdings (OTC: TCEHY) and Tesla (NASDAQ: TSLA) all have something in common and it extends beyond highly visible, game-changing, technology-related companies.
Of course, those are excellent traits to have, but the commonality that investors really care about is returns. The average year-to-date return for that quartet is nearly 153 percent. Granted, that is skewed by Tesla's 370 percent surge, but when Tencent, China's largest Internet company can be considered the laggard of the group because it is up "just" 60.4 percent this year, then it is obvious this is a special group of stocks.
Facebook, LinkedIn, Tencent and Elon Musk's Tesla share something else in common and it pertains to the ETFs that have the largest allocations to these story stocks. The commonality: All of the ETFs that hold double-digit weights to these stocks are small in terms of assets under management and only one resides above the $100 million watermark that so many so-called experts deem as critical in assessing an ETF's worth. Start with Tesla.
Market Vectors Global Alternative Energy ETF (NYSE: GEX)
The Market Vectors Global Alternative Energy ETF is an interesting case. GEX has been a stellar perform all year. In fact, it is one of the best-performing non-leveraged ETFs of any type, but it was reverse split in early July.
Reverse splits are normally reserved for slumping ETFs. That aside, GEX has surged more than 49 percent this year, proving that being one of the "Tesla ETFs" is a good reputation to have. Tesla is now 15.1 percent of GEX's weight, the largest among any ETF, yet GEX has less than $86 million in AUM.
Don't forget the First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ: QCLN). Up more than 60 percent this year, QCLN has a 12.6 percent allocation to Tesla, but just $70.6 million in AUM.
PowerShares NASDAQ Internet Portfolio (NASDAQ: PNQI)
The PowerShares NASDAQ Internet Portfolio has $143.1 million in AUM, but the ETF's move to and beyond $100 million in assets is recent event. Back in July when PNQI was highlighted as a great way to get access to stocks with triple-digit price tags, it had less than $75 million in AUM.
PNQI is up more than 40 percent this year, a move that has been helped in large part by a 12 percent allocation to Facebook, by far the ETF's largest holding. Although PNQI does not have the largest weight to Mark Zuckerberg's company among ETFs, it does have the largest weight to another high-flying technology company: Netflix (NASDAQ: NFLX). Finding ETFs that feature Netflix among their top-10 holdings is harder than one might think. The stock accounts for just 4.3 percent of PNQI's weight, but that enough to make it the ETF's seventh-largest holding.
Global X Social Media Index ETF (NASDAQ: SOCL)
SOCL has been the recipient of plenty of attention since it was confirmed the ETF would likely be the first to add Twitter after the company's IPO, whenever that will be.
When that news broke last week, SOCL had $23.7 million in AUM, $10.8 million of which had come into the fund since the start of August. SOCL now has almost $29.9 million in AUM, a 26.1 percent jump in less than a week.
Forget Twitter for a moment because it is not yet public. SOCL has the largest allocation to Facebook among ETFs. And to LinkedIn. And to Tencent. Those stocks combine for 34 percent of the fund's weight and that explains why SOCL is up 47.1 percent year-to-date.
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