If you haven’t heard of Facebook, Twitter, LinkedIn or Yelp, then you probably don’t have a smart phone, iPad or any other tablet device. There’s an evolution underway that is driven by online Social Media – the interaction among people where they can create, share or exchange information and ideas through websites and application systems.
The Internet has revolutionized the Information age. The Technology Bubble that saw a market crash in 2000 caused many investors to become wary over Internet company’s and the validity of their product or service. The bubble was caused by increased speculation in share investment, with rapid share price growth and high valuations that, in the end, could not be supported by the revenue and profitability of the businesses.
Less than 15 years later, the Tech Crash is all but forgotten with new stock market listings such as Google and LinkedIn making exceptional gains in recent years. When previously the Tech boom had been driven by Hardware companies (such as IBM) and Software companies (such as Microsoft), the new Technology craze is all about Social Media.
Stock Price Performance
Stock price performance of the leading Social Media companies is reflective of the 2000 Tech bubble. The following table depicts some of the key players in this industry, and how they have performed since listing:
Some key statistics about the number of users for these companies includes:
- Facebook has 1.31 trillion global users (as at 1st Jan 2014)
- Twitter has 645.75 million global users (as at 1st Jan 2014)
- LinkedIn has 300 million users
- Google has approximately 2 billion searches per day, with Google+ noting over 300 million active users
Clearly, the longer the company has been riding the Technology revolution, the better the share price performance has been. But this is true for all longer-term investment in the stock market. Still, investors hate nothing more than missing out on a strong rising stock. This phenomenon is referred to as FOMO – Fear of Missing Out!
If you don’t want to miss out on the Social Media revolution, here are 2 investment ideas on how you can participate:
- Buy shares in the actual companies. Of course, investing in stocks has the Risk that the share price might decline (for whatever reason). You will need to analyse the companies and choose what you would like to invest in. These companies do not typically provide dividends, certainly not at the same yields that Australian stocks produce.
- Buy the Social Media Exchange Traded Fund – SOCL. The Global X Social Media Index ETF is designed to reflect the performance of companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications. There are 27 companies in its holdings, and it has been listed since the 14th November 2011. If you would like to buy SOCL click here
Exchange Traded Funds (ETFs) provide the investor with the ability to gain exposure to the underlying components, without physically having to buy each share that it represents. The ETF trades exactly like a stock, and therefore has the same risks and influences.
SOCL has been trending downwards, as have most of the leading Social Media companies, having retraced from $23 in March to the recent $17.50 price range – that’s a 24% decline. If the Social Media industry is oversold at these levels, investors could perceive this to be an attractive level to accumulate. Monitoring for signals of a change in trend might offer the investor the opportunity to ride a recovery back towards the recent long-term highs.
Of course, with any investment strategy, you need to devise your exit plan before you enter the trade. Should SOCL continue retracing, you need to establish a price level at which to exit the position.
If you would like more information on Exchange Traded Funds (ETFs) or Social Media investing stocks, feel free to contact our US Equities and Options desk on (07) 5585-4200.
Matthew Brown – US Stocks & Options specialist
US Equity & Option Client Advisor
Halifax Investment Services
ASIC Australian Financial Services License Number – 225973
Matthew is an Authorised Representative of Halifax Investment Services (Halifax). Halifax provides broker services, including Full Service and Discount Services using multiple trading platforms.