FDN First Trust DJ Internet Index Fund

The social network giant had a horrid IPO initially but recouped the damage soon by adding almost 100% this year. The market value of FB has been rising by leaps and bounds over the last few months and currently stands at about $141 billion.
 
The ongoing boom in the Internet space especially in developing nations, significant software developments, and growing prospects in online and mobile advertising business made FB a clear winner in the recent past and the stock will likely continue to be on the bulish trend in the coming days. Some market researchers estimate that FB’s share in the online ad market is likely see a jump in the next two years.
 
If this was not enough, FB’s recent addition to the S&P 500 index inspired optimism around the stock in the market. FB gained about 5% on its first trading as an S&P 500 component. Some experts believe that the addition to the S&P 500 index and the consequent demand for it urged FB to extend its shares offering in the secondary market (read: Will Investors 'Like' these ETFs as Facebook Joins SP 500).
 
New Stock Offering
 
Following an eventful IPO in late 2012, Facebook (FB) is now gearing up for a secondary stock offering. The twist in the tale is that a large piece of Facebook’s secondary offering announcement of 70 million Class A shares is owned by the Facebook head Mark Zuckerberg (about 41 million). 
 
Investors, if at all, doubtful over FB’s future should note that though the company’s chief opted for a stake sale, Zuckerberg will retain a sizable 62.8% voting right of outstanding capital stock, down from 65.2%. This reduction will help him to meet his tax obligations and not have much impact on his control power. As per sources, the latest offering is intended to fund working capital and other general corporate purposes. In any case, FB has a Zacks Rank #2 (Buy).
 
ETF Impact
 
FB has considerable exposure in funds like Global X Social Media Index ETF (SOCL), PowerShares NASDAQ Internet Portfolio (PNQI) and First Trust Dow Jones Internet Index (FDN). Following FB’s official joining as an S&P component, the funds covering FB inched up more than 1.2%. This conforms to the overall bullishness in the social media space.

Thus, investors willing to capitalize on this recent uptrend and stock offering by FB, might consider buying these products. The trio has a top Zacks ETF Rank of ‘1 or 2’ and could be interesting picks to cash in on the social media boom.

SOCL in Focus
 
SOCL looks to track the Solactive Social Media Index which measures the performance of companies involved in the social media industry. In its 31-stock portfolio, the in-focus FB takes up the top spot with 10.87% allocation. So far, the fund has generated an AUM of $113.6 million.

The ETF charges 65 bps in fees a year. The fund returned 63% in YTD frame ( as of December 23). SOCL has a Zacks ETF Rank of 2 or ‘Buy’ rating with ‘High’ risk outlook (read: Is the Social Media ETF Losing Its Luster?).

PNQI in Focus

This ETF – tracking the Nasdaq Internet Index – invests about $263.5 million of assets in 80 securities in the Internet segment of the economy. FB takes up the first position here with 8.95% of holdings. The fund surged a handsome 65% in the YTD time frame. PNQI is a cheaper fund, charging 60% of expense ratio. PNQI has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with ‘High’ risk outlook.

FDN in Focus

This ETF offers exposure to the Internet segment of the broad tech sector by tracking the Dow Jones Internet Index. Among the three, this is by far the largest fund. FDN invests about $1.9 billion of assets in 41 securities in the Internet segment of the economy. The stock under review – FB – holds the third position here with 6.63% of holdings.

FDN added an impressive 54% in the YTD time frame. FDN is a more low-cost option, charging 57% of expense ratio. FDN has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with ‘Medium’ risk outlook (read: Top Ranked Internet ETF in Focus: FDN).

Bottom Line
 
Facebook’s earnings have surprised the market for the last three quarters by wide margins. The stock’s short-term moving averages have outpaced long-term ones indicating a bullish trend ahead. Amid such a backdrop, investors should ‘Like’ Facebook at least for the near term.
 
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FACEBOOK INC-A (FB): Free Stock Analysis Report
 
FT-DJ INTRNT IX (FDN): ETF Research Reports
 
PWRSH-ND INTRNT (PNQI): ETF Research Reports
 
GLBL-X SOCL MDA (SOCL): ETF Research Reports
 
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