7 ETFs for Advisors Looking to Play Facebook
May 22, 2012 11:03 AM
7 ETFs for Advisors Looking to Play Facebook<br><br>
Less than a week ago, Facebook (FB) raised more than $16 billion in the largest Internet IPO in Wall Street history. And even though the stock has actually lost ground since opening at $38 a share, some investors are still eager to get a piece of the most important social networking company in the world.
Sure, everyone wants to own the hot new stock but many advisors and their clients are just as concerned about the potential downside risk.
Thats why ETFs are a very popular and viable option for advisors and clients looking to get in on the Facebook mania without putting all their eggs in one basket. Heres a look at seven prominent ETFs that are expected to add significant shares of Facebook to their portfolios in the near future.
Source: ETF Database
Sure, everyone wants to own the hot new stock but many advisors and their clients are just as concerned about the potential downside risk.
Thats why ETFs are a very popular and viable option for advisors and clients looking to get in on the Facebook mania without putting all their eggs in one basket. Heres a look at seven prominent ETFs that are expected to add significant shares of Facebook to their portfolios in the near future.
Source: ETF Database
Global X Social Media ETF (SOCL)<br><br>
This hyper-targeted ETF from Global X is designed to offer exposure to the social media industry, so it should come as no surprise that Facebook will be a component stock. SOCL currently consists of both domestic and international social media companies, including LinkedIn, Tencent Holdings, Sina Corp and Google.
This fund will be one of the first (most likely the first) U.S.-listed ETF to include FB stock. The underlying Solactive Social Media Index will include new IPOs after just five trading days, meaning that FB should be included in SOCL within about a week of the IPO.
Expected Date for Facebook Inclusion: May 25
This fund will be one of the first (most likely the first) U.S.-listed ETF to include FB stock. The underlying Solactive Social Media Index will include new IPOs after just five trading days, meaning that FB should be included in SOCL within about a week of the IPO.
Expected Date for Facebook Inclusion: May 25
PowerShares QQQ (QQQ)<br><br>
As major exchanges were battling for the rights to be the primary listing destination for Facebook, the Nasdaq announced an interesting change to the methodology used to construct and maintain the popular Nasdaq-100 Index .
The so-called seasoning period that new listings must endure before being added to the tech-heavy benchmark was recently shortened from one year to three months meaning that FB shares would be eligible for inclusion into the Nasdaq sometime in August. That could be an interesting stretch for FB stock; with some $50 billion in assets linked to the Nasdaq-100, the addition of the social media company will trigger a wave of repurchases.
Expected Date for Facebook Inclusion: Dec. 24
The so-called seasoning period that new listings must endure before being added to the tech-heavy benchmark was recently shortened from one year to three months meaning that FB shares would be eligible for inclusion into the Nasdaq sometime in August. That could be an interesting stretch for FB stock; with some $50 billion in assets linked to the Nasdaq-100, the addition of the social media company will trigger a wave of repurchases.
Expected Date for Facebook Inclusion: Dec. 24
Technology SPDR (XLK)<br><br>
By far the most popular ETF in the Technology Equities ETFdb category, is XLK, which offers exposure to the U.S. technology market. XLK includes all the major technology giants, with big weightings afforded to Apple, IBM, Microsoft, AT&T, and Google. But it might be awhile before FB finds its way into this fund, as the stock wont be eligible for inclusion in the underlying index for quite some time (potentially).
In order to make it into the S&P Technology Select Sector Index, a company must be included in the S&P 500. To make that cut, stocks must meet a number of different criteria. One of those is a 50% public float meaning that at least half of the companys shares must trade on a public exchange. Facebook wont come anywhere near that threshold with its IPO, as it is expected that the company will list only a fraction of its shares.
In all likelihood, fewer than 10% of all FB shares will be available to the public after the IPO, meaning that the company still has a long ways to go before it becomes a card-carrying member of the S&P 500. In other words, dont hold your breath to see Facebook in XLK.
Expected Date for Facebook Inclusion: Unknown and dependent on FBs public float.
In order to make it into the S&P Technology Select Sector Index, a company must be included in the S&P 500. To make that cut, stocks must meet a number of different criteria. One of those is a 50% public float meaning that at least half of the companys shares must trade on a public exchange. Facebook wont come anywhere near that threshold with its IPO, as it is expected that the company will list only a fraction of its shares.
In all likelihood, fewer than 10% of all FB shares will be available to the public after the IPO, meaning that the company still has a long ways to go before it becomes a card-carrying member of the S&P 500. In other words, dont hold your breath to see Facebook in XLK.
Expected Date for Facebook Inclusion: Unknown and dependent on FBs public float.
ETRACS Next Generation Internet ETN (EIPO)<br><br>
As the name suggests, EIPO is another exchange-traded product that will soon include Facebook as a component stock. And based on the rules of the underlying UBS Next Generation Internet Index, FB stock could be included within a few weeks of the IPO. The index is rebalanced on a monthly basis, at which time new securities that meet the inclusion criteria may be added.
Specifically, this index is rebalanced at the close of business on the first Tuesday of every month, meaning that the index should include FB stock when the opening bell rings on June 6.
As an interesting side note, the index to which EIPO is linked is market cap weighted but calculates market cap including all share classes regardless of who holds them. In other words, FB should get a pretty hefty weighting in this ETN, since there is no adjustment made to account for the fact that most shares will still be held by insiders after the IPO.
Expected Date for Facebook Inclusion: June 6
Specifically, this index is rebalanced at the close of business on the first Tuesday of every month, meaning that the index should include FB stock when the opening bell rings on June 6.
As an interesting side note, the index to which EIPO is linked is market cap weighted but calculates market cap including all share classes regardless of who holds them. In other words, FB should get a pretty hefty weighting in this ETN, since there is no adjustment made to account for the fact that most shares will still be held by insiders after the IPO.
Expected Date for Facebook Inclusion: June 6
First Trust US IPO Index Fund (FPX)<br><br>
This ETF is designed to measure the performance of companies U.S. companies that have recently gone publicspecifically, those that are within their first 1,000 trading days after an IPO. The underlying index consists of the 100 largest stocks that fall into that window, utilizing total market capitalization to make that calculation. With an expected market cap of around $100 billion, Facebook could be one of the largest holdings in this fund; currently, the largest allocations are to Visa (market cap of about $77 billion) and Philip Morris ($143 billion).
New IPOs are added to the underlying index after their seventh trading day.
Expected Date for Facebook Inclusion: May 29
New IPOs are added to the underlying index after their seventh trading day.
Expected Date for Facebook Inclusion: May 29
PowerShares NASDAQ Internet Portfolio (PNQI)<br><br>
This Internet ETF holds a portfolio of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses and that are listed on one of the major U.S. stock exchanges. Currently, PNQI has large allocations to Amazon (10%), eBay (9%), and Priceline (8.5%). PNQI is linked to an index that is rebalanced and reconstituted on a quarterly basis, but the annual review process doesnt happen until March.
Expected Date for Facebook Inclusion: March 18, 2013
Expected Date for Facebook Inclusion: March 18, 2013
First Trust Dow Jones Internet Index Fund (FDN)<br><br>
This ETF is linked to the Dow Jones Internet Composite Index, a benchmark that includes companies that generate at least half of their revenues from the Internet. Current top components include Google, Amazon, eBay, and Priceline.com. In order to be eligible, stocks must have at least three months of trading history, meaning Facebook could be included in August of this year. The index composition is reviewed each quarter, with rebalancing taking place after the close of trading on the third Friday of March, June, September and December.
Expected Date for Facebook Inclusion: September 24
Also see:
10 Gigantic Mistakes That Can Cripple Your Clients ETF Portfolios
6 Simple (But Important) ETF Trading Tips
10 Dividend-Paying Stocks Your Clients Will Want
April Powers: Dows 5 Best-Performing Stocks
April Showers: Dows 5 Worst-Performing Stocks
Expected Date for Facebook Inclusion: September 24
Also see:
10 Gigantic Mistakes That Can Cripple Your Clients ETF Portfolios
6 Simple (But Important) ETF Trading Tips
10 Dividend-Paying Stocks Your Clients Will Want
April Powers: Dows 5 Best-Performing Stocks
April Showers: Dows 5 Worst-Performing Stocks
