Invest in Instagram? There's a Better Option

Michael Robinson

Friday, March 03, 2023

It may sound a bit odd coming from a boomer of a "certain age," but I am a social media freak.

For instance, I spend hours on photo-sharing platform Instagram, and for two very good reasons:

First, my wife and I are passionate art collectors. And right now, Instagram is the leading place to discover and follow new talent.

Second, both of my daughters are on Instagram, so it's a great way for my wife and I to stay up to date on their adventures without intruding into their personal lives (too much, anyway).

I'm just one of Instagram's one billion users, a statistic that suggests this platform is a massive hit in the social media sector. According to Statista, this sector is on track to bring in $200 billion in advertising sales by 2024. That's a 51% increase since 2020.

The thing is, there's no direct way to invest in Instagram. Bummer. But don't worry...

I'm going to reveal a way to invest in this entire sector...

The Social Media Juggernaut

First, though, let's take a broader look at social media.

It's impossible to overstate the impact Instagram has had on "Gen Z-ers," those 70 million people born roughly between 1997 and 2012.

As baby boomers retire, Gen Z is rapidly becoming the dominant consumer group in the U.S. These are young people who grew up on smartphones and mobile apps. And that makes them an advertiser's dream come true.

You see, a report from intelligence company Morning Consult says that 54% of Gen Z-ers spend at least four hours a day on social media. No wonder advertisers are pouring so much money into outlets like Instagram.

A moment ago, I noted that there is no direct way to invest in Instagram. That's because it's owned by social media giant Meta Platforms (META), formerly known as Facebook.

That's OK, though. Meta remains a controversial investment, despite having recently reported strong quarterly earnings. But the wider point is this...

The social media sector has plenty of platforms that can line our pockets. And here's something else to consider...

Broad Exposure With a Single Investment

As investors, we want to capture any upside a new player in this space might offer. And that can be difficult if we're holding just one stock or trying to find opportunities one at a time.

In a case like this, we want to have our capital target as many investments in the social media space as we can. And we can do exactly that by investing in a fund that trades at just 20% of META's estimated $170 price tag.

The fund I'm referring to is the Global X Social Media ETF (Nasdaq: SOCL). As its name suggests, this exchange-traded fund ("ETF") invests in social media stocks from around the world, giving investors broad exposure to this sector.

Notably, it holds several Chinese companies, giving us access to a high-growth country without the downside of investing into this nation directly at a time when its relations with the U.S. are frayed.

One such company is Tencent (TCEHY), the fund's largest position at nearly 13% of its assets. After recently releasing weak financial results, this company is revamping operations. Tencent owns the popular messaging and social app WeChat and ranks as the world's top video game maker.

As for some of this fund's other holdings...

Inside the Portfolio

Snap (SNAP) is the California-based company behind Snapchat. This app started as a simple messaging service focused on sharing photos but has now integrated ad-supported short-form video content. Snap boasts more than 375 million daily active users in more than 20 countries.

Match Group (MTCH) is best known for its dating service but also owns similar platforms like Tinder, Hinge, and OkCupid. Make no mistake: These platforms may focus on dating, but above all else they serve as social networks.

Pinterest (PINS) has evolved since its humble beginnings as an image-sharing website. It's now a complete social network platform based around the concept of sharing "ideas" on anything about your favorite projects to wish lists for Christmas. Last month, the service logged 450 million monthly active users.

For its part, Baidu (BIDU) – often referred to as "China's Google" – gives this ETF additional access to the Chinese market. Much like Google, Baidu's central platform is an Internet search engine. But the company has expanded beyond that. It's now one of the world's largest Internet and artificial intelligence ("AI") companies, offering everything from online encyclopedias to web analytics.

Win No Matter What

As you can see, with SOCL, we win no matter what happens in the social media space. And if new companies emerge with strong offerings, this fund is likely to pick them up, too.

That's one of the benefits of investing in an ETF. We get all the upside of a particular sector while fund managers do all the research.

Still, you might be interested in targeting a specific social media stock in order to maximize your profit potential. If that's the case, check out my "Pro" recommendation below, where I'll reveal a company I'm particularly excited about.



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Cheers and Good Investing,

Chief Investment Officer
Trend Trader Daily

Tags: instagram social-media