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With large cap U.S. indices hitting record highs on a daily basis, it is becoming easier to spot the areas of the market that aren’t participating. The one that stands out the most in my view is Social Media. A high-growth, high-profile industry that had huge outperformance in 2013, one would expect it to be posting similar gains in 2014.
However, the opposite has been true. Social Media has lagged the broader indices by a considerable margin in 2014 and the Social Media ETF (SOCL) is now down over -13% this year.
The weakness in the space is evident in the table below, with losses on the year in prominent U.S. names such as Twitter (TWTR), Groupon (GRPN), Pandora (P), Yelp (YELP), Google (GOOGL) and LinkedIn (LNKD). On the positive side, the notable outlier in the U.S. has been Facebook (FB), whose shares have risen over 40%.
The question for investors is whether this weakness is merely temporary or perhaps an early indication that share prices and expectations have gotten ahead of fundamentals.
I don’t have an answer to this question but I do believe it’s notable that this high-growth area of the market is exhibiting weakness while more defensive areas, including Utilities and long duration Treasuries, continue to lead.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts. He is the co-author of two award-winning research papers in 2014 on Intermarket Analysis and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors, an institutional investment research firm. Previously, Mr. Bilello held positions as an Equity and Hedge Fund Analyst at billion dollar alternative investment firms, giving him unique insights into portfolio construction and asset allocation.
Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.
You can follow Charlie on twitter here.
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