ETFs are powering a new Internet boom

Internet and social-media stocks are flying high again, and exchange-traded funds in the sector are outperforming the market.

By Benzinga Dec 11, 2013 5:15PM
Image: Couple with laptop (© Daly and Newton/OJO Images/Getty Images)By Matthew McCall

The markets have been pulling back from highs recently, but there is one sector that continues to attract buyers.


Internet stocks are flying high again and the First Trust Dow Jones Internet Index ETF (FDN) was trading at a new all-time high, outperforming the market by 100 basis points on Tuesday.


Experiencing an even better day is the niche social media stocks, with the Global X Social Media ETF (SOCL) up 4 percent.


The two ETFs have some overlap with their top 10 holdings, but for the most part FDN is more of the "old school" Internet companies and SOCL is more heavily weighted with stocks of companies in the infancy stages. 


Top holdings for FDN include Google (GOOG) and Amazon.com (AMZN) while the top two holdings for SOCL are Chinese social media company Tencent (TCEHY) and U.S.-based LinkedIn (LNKD).


See also: ETF Outlook for Wednesday, December 11, 2013 (IGN, PBE, EWA, XLF)


Three positions are in both ETFs' top ten holdings: GOOG, LNKD, and Facebook (FB).


Both ETFs are trading at their best levels ever, but SOCL is putting together a better 2013 with a gain so far of 61 percent. FDN is no slacker versus its other peers with a gain of 47 percent this year.


The future of technology and the Internet will be based on the way people do business a decade from today. Think about how social media has changed the landscape forever and how there is still more to be developed. The winners will be a combination of the old school companies like Google as well as the latest darlings such as Facebook.


The two ETFs allow investors to gain exposure to both sides of the future of technology through the old guard and the up and comers. Even though there is some overlap between the two ETFs, an investor could realistically own both as part of a core and explore strategy. This is one of the rare times two ETFs in the same sector make sense in a portfolio.


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1Comment
Dec 11, 2013 6:01PM
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If anyone tells you that a certain sector or product is "powering a new internet boom", look around, note where the exits are and start quietly moving toward them. 
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