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Let The Buyer Beware

The Global X Social Media Index ETF (NASDAQ:SOCL) provides investors with an efficient way to gain exposure to the social media industry, holding a broad basket of companies from all over the world that provide social networking, file sharing, and other web-based media applications. Social media has grown dramatically over the last decade and one would think this would be a very profitable focus. But like most of the themed ETFs I have investigated so far, SOCL has under-delivered. In this case, SOCL has not even come close to the performance of the SPDR S&P 500 Trust ETF (NYSEARCA:SPY).

Fundamentals

Per the fund website, SOCL has a P/E ratio of 26.0, based on consensus estimates. I would normally consider the P/E ratio to be too high but considering that social media is a high-growth industry, this should be expected.

The Return on Equity (ROE) is listed as 12.9%, also based on consensus estimates. I did my own calculation, based on the ROE trailing 12 months for companies listed on a U.S exchange using Portfolio123.

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by Steve Auger