Market Overview

Beyond The Obvious: What ETFs Could Make Room For Facebook?


It's probably safe to say that most investors, perhaps 99.9%, know that social media darling Facebook will make its debut as a public company on Friday May 18, trading on the Nasdaq under the ticker "FB." And a lot of those investors also know that one of the first ETFs to include Facebook among its lineup will be the Global X Social Media Index ETF (Nasdaq: SOCL), which rolled out in November 2011.

In its brief life span SOCL has already seen its fortunes tied to the Facebook IPO. Given its name, it's easy to see why SOCL and the Facebook IPO are arguably joined at the hip.

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There are more legitimate reasons, too. Earlier this year, Global X CEO Bruno del Ama told Benzinga Facebook could be added to SOCL's lineup as soon as the end of the stock's fifth trading day.

"At a $75 billion to $100 billion valuation with a free float of 5% to 10%, Facebook would immediately be among the largest holdings in the ETF," del Ama said at the time.

So we know that SOCL will almost certainly be one of the ETFs that Facebook calls home. Inspired by a conversation on Twitter, we went searching for the other ETFs where Facebook could land. Kudos to our source for noting that LinkedIn (NYSE: LNKD) could serve as a possible proxy for ETF destinations for Facebook.

LinkedIn, now with a market cap of $11.2 billion, is found in more than 20 ETFs and is SOCL's largest holding with a weight of almost 11.8%.

Let's look at some that be home to Facebook as well, excluding SOCL and another obvious play, the PowerShares QQQ (Nasdaq: QQQ).

SPDR Morgan Stanley Technology ETF (NYSE: MTK): The unheralded SPDR Morgan Stanley Technology ETF, home to 37 stocks and almost $177 million in AUM, devotes 4.2% of its weight to LinkedIn, making it the ETF's second-largest holding. In fact, LinkedIn's weight in MTK is larger than Apple's (Nasdaq: AAPL). Looking at MTK's constituents, the ETF makes for a logical home for Facebook at some point.

PowerShares Dynamic Media Portfolio (NYSE: PBS) The PowerShares Dynamic Media Portfolio is heavy on old media stocks as CBS (NYSE: CBS) and Walt Disney (NYSE: DIS), but the ETF doesn't skimp on IT stocks as that group accounts for almost 23% of the fund's weight. LinkedIn has been a member of this ETF in the past, though it's not right now.

That said, Google (Nasdaq: GOOG) accounts for over 5% of PBS' weight so Facebook could be a member of PBS' lineup down the road. The next rebalance date for PBS is August, making for a logical entry date for Facebook.

First Trust Dow Jones Internet Index Fund (NYSE: FDN) Surprisingly, the First Trust Dow Jones Internet Index Fund doesn't yet include LinkedIn among its constituents, but looking at FDN's lineup, it makes for a logical destination for both Facebook and LinkedIn. The ETF's next rebalancing date is June, but new additions have to be three months from their IPO to be included here.

In other words, LinkedIn may find its way into FDN next month, but Facebook will have to wait until September. Add the PowerShares NASDAQ Internet Portfolio (Nasdaq: PNQI) to the list of ETFs that should be holding LinkedIn now and do not and should be holding Facebook in the future.

Vanguard Information Technology ETF (NYSE: VGT) LinkedIn accounts for a small percentage of VGT, but Zynga (Nasdaq: ZNGA) and a couple of other social media plays are found in this found. There's only so much room to go around in VGT, though, because Apple accounts for 18% of the fund's weight. It wouldn't be surprising to see Facebook go into VGT later this year, but don't expect a large weight to start.

For more on social media ETFs, please click HERE.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Specialty ETFs New ETFs Previews Best of Benzinga


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