Social Media Stocks Aren't Dead Yet

Bruised, bloodied and left for dead. That’s the only way you could describe social media stocks after investors started selling back in September.

But all that could change in just a few short days. More on this idea in just a second…

For more than six weeks, the once-hot social media stocks couldn’t catch a bid. Facebook, LinkedIn Groupon and other popular names appeared to have topped out. Some even posted double-digit losses. While the broad market recovered from the government shutdown scare and moved higher into November, these momentum leaders weren’t invited to the party.

“Given the disappointing performance of the stocks and another bubble talk, the only pure play ETF tracking the performance of social media companies – Global X Social Media Index ETF lost nearly 3.62% over the trailing one-month period,” Zacks Investment Research reports. “This is in contrast with the gains of 2.33% for the broad technology fund and 2.69% for broad U.S. market fund.”

Global X Social Media Index Fund

A lot of analysts have been quick to call the top in the richly-valued social media group and other high-flying internet stocks. However, yesterday’s price action shows that these stocks might not be as fragile as everyone believes.

Facebook and Yahoo! have snapped back to life. Both surged more than 4% yesterday. In fact, Yahoo! (a trade that’s up 15% since I initially alerted readers of my Rude Awakening PRO, several weeks ago) blasted to new 52-week highs.

This bullish action could trigger another wave of buying throughout the sector. The leaders are already moving, so it’s time to look for the second-tier names to get a boost if the rally holds. Remember, stocks tend to rally hard into the New Year. After underperforming the market in the fall, social media could surprise a lot of investors heading into 2014.

Regards,

Greg Guenthner
for The Daily Reckoning

P.S. In this morning’s Rude Awakening email edition, I told investors to keep a close eye on these stocks for a trade over the next few sessions… and I even gave them a chance to discover a specific sympathy mover you can trade right now. Don’t miss another great opportunity to cash in on this end-of-year rally. Sign up for the FREE Rude Awakening email edition, right here.