Social media is a computer-based technology that facilitates the sharing of ideas, thoughts, and information through the building of virtual networks and communities. By design, social media is internet-based and gives users quick electronic communication of content.
The word social media is not foreign to us and it has been around for decades. The first social media platform was Six Degrees which was created in 1997 followed by a more popular social media site, Friendster which was launched around 2002. Social media allowed people to connect via the internet and today the industry continues to thrive.
In a study conducted by Statista, 70% of the U.S. population has at least one social media profile. While China has the biggest social media market worldwide with 822 million users in 2019. By 2021, the number of worldwide social media users is expected to reach about 3.1 billion people.
The COVID-19 pandemic has taken a toll on many industries but social media was not one of them. Enforced lockdowns, and people's inclination to stay indoors to protect themselves boosted the industry in 2020. As social distancing was in place, social media kept us connected to each other with maximum social distancing. In a survey conducted by Digital Commerce 360, the majority of respondents agreed that their social media consumption (72%) and posting (43%) have increased during the pandemic. According to Global WebIndex, users are spending an average of 2 hours and 24 minutes per day multi networking across an average of 8 social networks and messaging apps.
Not only did it help us stay connected during the pandemic, but it also helped businesses stay alive by the use of e-commerce, sales channels, and online advertising in social media. According to Lyfe Marketing, 97% of marketers are using social media to reach their audiences. And according to HubSpot, social media has a 100% higher lead-to-close rate than outbound marketing tactics.
During the recent elections, Social media gave voice to the voters and helped predict the outcome. According to insights from Study.com, 72% of US Citizens of voting age actively use some form of social media. Data from Hootsuite showed that there were 6.6 million total mentions of Trump and Biden, with Biden owning 72% of those mentions during the debate between those two candidates.
In order to identify the 12 Best Social Media Stocks To Buy Now, we started with the 38 holdings in the Global X Social Media ETF (SOCL) as of December 31, 2020, and we were able to narrow down our list to 12 stocks by using our hedge fund sentiment scores.
Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017. Some of the portfolio holdings of our monthly newsletter have been shared online too. In October, we shared this real estate stock and since then, it’s been up nearly 50 percent.
Based on our hedge fund sentiment data, we present to you, the 12 Best Social Media Stocks To Buy Now, among the 800+ hedge funds tracked by Insider Monkey:
12. Angi Homeservices, Inc. (NASDAQ:ANGI)
No of HFs: 42 Total Value of HF Holdings: $348 Million
We start the list of best social media stocks to buy now with Angi Homeservices, Inc. The company is home to the world’s largest digital marketplace for home services. On November 11, 2020, the president and COO of ANGI sold 371,738 shares of ANGI at an average price of $10.42 a share. The total sale was $3.9 million.
The top hedge fund holder of this stock is Jim Simons' Renaissance Technologies which had $46 million invested in the stock at the end of September. We published an article about ANGI recently and said the following:
ANGI Homeservices Inc (NASDAQ:ANGI) is the largest home-improvement site in the digital space today. Selling at more than 300 times earnings, it is also far from a cheap stock. But it is also undergoing a transformation that, if successful, could not only make it a much more profitable company, but could also significantly increase its market share.
....Barry Diller’s holding company, IAC, holds an 85% stake in ANGI Homeservices. So, purchasing IAC may be more attractive for investors interested in tapping into ANGI’s growth opportunity who might balk at the high valuation. IAC’s current equity value is ~$10.4 billion. The value of IAC’s stake in ANGI Homeservices and the cash on its balance sheet is ~$9.2 billion. Investors who purchase shares in IAC also get to invest alongside Barry Diller in other early-stage companies, including digital media company Dotdash and Software-as-a-Service (or SaaS) video tools provider Vimeo, at an implied valuation of $1.2 billion, which I believe could easily be a relative bargain compared to their long-term value.
11. Baidu, Inc. (NASDAQ:BIDU)
No of HFs: 43 Total Value of HF Holdings: $2.80 Billion
BIDU is a Chinese multinational company. The company was mentioned as one of the 10 Best Chinese Stocks to Buy Now. They are known for connecting users to relevant information online, including web pages, news, images and documents through the use of mobile devices, PCs, and other smart devices.
Check out an article where we shared GDS Investments' views about the stock:
“With China on the mind, we turn to Chinese internet search firm Baidu, Inc. (NASDAQ: BIDU). At a price of approximately $115.00 per share, the company’s stock is at a 6-year low after it reported its first ever publicly-traded quarterly loss.
Interestingly, that loss is largely attributable to one factor: the company’s higher-than-normal operating costs during the first quarter when Baidu served as the main sponsor of the 2019 CCTV Chinese New Year Gala. In terms of television viewership, that gala is something like producing ten Super Bowl-level events all at one time. In a win for the company, though, and despite the high costs it incurred, Baidu doubled its daily active users. That, of course, should lead to better top-line results in the future.
To the extent other factors influenced the unexpected weakness in Baidu’s bottom-line results we can point to the company’s 58% ownership in iQIYI, Inc. (NASDAQ: IQ), a Netflix-like on-demand video streaming service and 19% ownership of Ctrip (NASDAQ: CTRIP). Collectively these two holdings comprise roughly 30% of BIDU’s current market capitalization. With clear leadership in search, video streaming, AI and autonomous vehicle technology, Baidu is one the best and cheapest ways to gain access to these emerging growth technologies. Though the YTD performance of this company is disappointing, we remain optimistic about its long-term prospects.”
10. Spotify Technology, Inc. (NYSE:SPOT)
No of HFs: 44 Total Value of HF Holdings: $1.64 Billion
SPOT ranks 10th in our list of the best social media stocks to buy now. The Swedish audio streaming and media service provider has only publicly traded on the New York Stock Exchange since 2018 but has been around since 2006. The company provides digital music-streaming services and at the same time provides a platform for artists to personalize and create their profiles for public listening.
Baron Partners Fund mentioned in an article that SPOT has the potential to grow from 138 million playing subscribers to over 250 million in four years.
“Spotify Technology S.A. is a leading global digital music service offering on-demand audio streaming through paid premium subscriptions as well as a free ad-supported model. Shares were down as second quarter revenues were negatively impacted by a pandemic-related pullback in advertising spend. We continue to view Spotify as a long-term winner in music streaming. It has potential to grow from 138 million paying subscribers to over 250 million in four years. This growth will be driven by its scalable core music product and expanding library of spoken-word content.”
Forager Funds also mentioned in an article that the stock is gaining popularity and even more popular than Kim Kardashian.
“The Spotify (NYSE:SPOT) share price has increased more than 60% since mid-May, adding more than US$15bn to its market capitalisation. The rally started after the company announced a multi-year exclusive licencing deal with Joe Rogan, one of the most popular podcast interviewers in the world. Since then, Spotify has announced additional exclusive contracts with Kim Kardashian and Barack Obama.
While that may seem like a lot of value to attribute to a couple of celebrity podcasts, it’s further evidence that Spotify is building a moat around its business. Prior to these investments, Spotify announced that 19% of users listened to podcasts in the first quarter of 2020, up from just 5% of users two quarters prior. That’s an additional 20 million people that started listening to podcasts on Spotify in a six month period.
The stock is becoming more popular than Kim Kardashian herself.”
9. NetEase, Inc. (NASDAQ:NTES)
No of HFs: 45 Total Value of HF Holdings: $3.66 Billions
NTES ranks 9th in our list of the 12 best social media stocks to invest in. The Chinese Internet Technology Company, NTES has provided its users with online services centered on content, community, communications, and commerce. Recently, the company announced that a concert by TFBOYS held on its platform has broken the Guinness World Records for the most viewed paid concert. The concert was viewed by over 786,000 fans, setting the world record title for “the most live viewers for a pay per view music concert on a bespoke platform.
The stock was mentioned as one of the 10 Best Cheap Stocks to Buy Now According to Ray Dalio and as one of the Top 10 Video Gaming Stocks to Buy Now.
8. Zynga, Inc. (NASDAQ:ZNGA)
No of HFs: 48 Total Value of HF Holdings: $959 Million
ZNGA ranks 8th in our list of the best social media stocks to buy now. ZNGA has been developing online games and mobile games since April 2007. The company aims to connect the world through games. By offering games for free primarily through the app stores of Apple and Google, as well as social networking sites such as Facebook and Snapchat.
Recently, ZNGA announced the pricing of $762 million aggregate principal amount of 0% convertible senior notes due 2026.
7. Snap, Inc. (NYSE:SNAP)
No of HFs: 51 Total Value of HF Holdings: $1.16 Billion
SNAP reinvented the way we look at camera and camera filters today by reinventing the camera itself. They provide a platform to take photos and videos, attach messages and send them to different users. The company was ranked #7 in the 2019 Valut Rankings for best internet and social media companies. SNAP was mentioned in the 5 Biggest Gainers and Losers: December 29, 2020:
"Snap Inc. (NYSE:SNAP) stock jumped more than 10 percent in the early trading Tuesday after receiving a price target hike from Goldman Sachs. SNAP shares are currently trading around their 52-week high. Goldman increased its price target for SNAP stock from $47 per share to $70 per share, saying the Santa Monica, California-based social media company will likely achieve faster revenue growth in the coming quarters. The research firm has a “Buy” rating for the stock."
Recently, the company announced that they are in talks with Bharat-focused social media firm, ShareChat for a minority stake. If the deal pushes through, it would be the first investment from Snap’s parent company into an Indian startup.
6. Match Group, Inc. (NASDAQ:MTCH)
No of HFs: 61 Total Value of HF Holdings: $2.84 Billion
MTCH ranks 6th in our list of the best social media stocks to buy now. If you’re looking for a major online dating service, Match Group, Inc. owns and operates about 45 global dating companies. One of the most popular dating site owned by Match Group is Tinder with an estimated user number of 50 million people worldwide.
MTCH partnered with RAINN, the nation’s largest anti-sexual violence organization to work together in improving the current safety systems. The expertise and recommendations of RAINN will accelerate Match Group’s work to a safer online dating service. Tracey Breeden, Head of Safety and Social Advocacy for Match Group mentioned that they are committed to creating actionable solutions for safety challenges,
"Every person deserves safe and respectful experiences, and we want to do our part to create safer communities on our platforms and beyond. By working together with courageous, thought-leading organizations like RAINN, we will up level safety processes and strengthen our responses for survivors of sexual assault. Safety challenges touch every corner of society. We are committed to creating actionable solutions by working collaboratively with experts to innovate on meaningful, industry-led safety approaches."
Is MTCH a compelling stock? Check out this article where we mentioned Blue Hawk Investment Group’s comments on the stock.
“Match Group (MTCH) – As we mentioned last quarter, we felt that restrictions on large social gatherings would be a tailwind for online dating and MTCH, as singles’ demand to date would not be diminished in a socially distant world. The company reported a strong Q1’20, with revenue growing 19% y/y ex FX, driven by Tinder Direct’s 31% y/y revenue growth with average subscribers growing 28%. In addition to the strong quarterly growth numbers, the company also noted accelerating engagement levels on the platform and record numbers of messaging and video dates, a positive sign for overall ecosystem health.
In addition, the company completed the spin-off from its parent company IAC on the last day of the quarter, becoming a fully independent company and greatly increasing the liquidity of its equity. As we saw from our days following and owning Blue Buffalo, these events can be counterintuitive for premier, durable growth stories. One would expect the increase in liquidity (supply) to put pressure on the share price, however, the opposite can occur in these unique situations – due to the over-concentration of assets in the growth fund space. The increased liquidity from the spin in this particular example allows the big funds to build a position, which was not previously possible, so supply of available stocks increases but demand increases to a larger extent and drives up the price, a nice nearterm tailwind for the newly-independent company.”
5. IAC/Interactivecorp (NASDAQ:IAC)
No of HFs: 72
Total Value of HF Holdings: $1.61 Billion
IAC is ranked as the fifth-best social media stock to buy now. The company provides media and internet services worldwide. The company operates thorugh five sectors: ANGI Homeservices, Vimeo, Dotdash, Search and Emerging & Others. An insider recently purchased 100 shares at around $123. The stock is up more than 55% since then.
Check out this article where Spree Capital made a few comments on the stock.
In our Q4 2019 letter we wrote about our rationale for investing in Match Group (MTCH). Early in the third quarter we used market confusion over the mechanics of the Match Group spinoff to build a position in IAC/InterActiveCorp (IAC) at a discount to IAC’s stake in publicly traded ANGI Homeservices (ANGI) and the cash on IAC’s balance sheet. Confusion over IAC’s debt transfer to Match Group and cash accruing to IAC from Match Group’s secondary proceeds and special dividend created a situation where we were being paid to take ownership in a host of great businesses that are set to compound shareholder value over the long term. IAC has often traded at a curious discount to the value of its businesses, but a newly simplified structure and plans to shine light on the businesses in IAC’s portfolio meant that this negative stub value was especially irrational, and ultimately short lived. Over time, we expect many of the businesses within IAC to be individually worth significantly more than the entire value of IAC today.
From the initial purchase of television station holding company Silver King Communications for $250 million in 1995, Barry Diller and IAC have multiplied their investment by over 240 times. Through a proven repeatable process, IAC identifies nascent businesses exposed to the secular trend of consumers shifting their consumption patterns from offline to online, makes long term investments to remove customer pain points on the supply side and demand side of the marketplace, and drives penetration of the category to take dominant share and to grow the total addressable market. When these category leaders grow their market to the extent that they are able to stand on their own, IAC spins the businesses to shareholders and refocuses its efforts on a new series of e-commerce marketplace businesses.
We often seek situations where proven management teams act like owners and invest through the income statement via lower margins and diminished short-term profits in order to grow market share and grow the market. These situations are inevitably judged harshly by a market myopically focused on the short term, but when executed well by proven operators, these situations create opportunities for outsized shareholder returns. We believe that this dynamic is evident in several of IAC portfolio companies, and that the outcome will be no different. With any investment we make, we look for multiple ways to win. In IAC, we see eight.
First, IAC’s largest holding, ANGI Homeservices (ANGI), is significantly undervalued relative to its earnings power today and has a long runway of high return on invested capital opportunities to take market share, grow the addressable market, and compound shareholder value. ANGI is an online marketplace for home services. Initially founded as a lead generation business, ANGI is rolling out fixed price home services which will accelerate ANGI’s transformation into a platform for managing one’s home. ANGI stands to benefit in several ways.
4. Twitter, Inc. (NYSE:TWTR)
No of HFs: 75
Total Value of HF Holdings: $2.15 Billion
As of the first quarter of 2019, twitter averaged 330 million monthly active users. It is not a surprising number with the services it offers. The platform was launched in 2006, and since then it has been providing users with social networking and microblogging services. According to Statista, as of May 2020, Barack Obama’s account had the most followers with 118 million people.
But is Twitter (TWTR) a stock to buy for 2021? Carillon Eagle Mid Cap Growth Fund recently made comments where he mentioned that twitter’s user count continues to accelerate.
“Twitter’s user count continues to accelerate due to the global stay-at-home situation as well as the numerous positive changes the company has introduced on the platform in order to keep users engaged. The addition of various topics and lists along with the expansion of video have led to more users joining the platform and kept existing users more engaged. We believe the next positive development on the horizon could come from the company’s ability to increase the monetization of these users.”
3. Pinterest, Inc. (NYSE:PINS)
No of HFs: 80
Total Value of HF Holdings: $3.48 Billion
Pinterest, Inc. enables its users to share images and connect through social media. It is designed for users to save and discover information and ideas through images, videos, GIFs, etc. During the third quarter of 2020, the company reported a revenue of $443 million. An insider recently purchased 40,000 shares at around $27. The stock is up more than 151% since then.
In an article, Carillon Eagle Mid Cap Growth mentioned that PINS proved to be a strong performer in the quarter after announcing stronger than expected revenue.
“Pinterest operates a pinboard-style photo-sharing website that lets users create theme-based image collections for events, hobbies, and other personal interests. The firm proved to be a strong performer in the quarter after announcing stronger than expected revenue and user growth, especially outside the U.S. The company is beginning to see a recovery in advertiser spending from retail and consumer packaged goods companies. Additionally, it is benefitting from high engagement levels, new tools for conversion optimization, new shop-able ads, and international growth.”
In a separate article, Choice Equities Capital Management mentioned that the stock is an improving outlook for digital advertising.
“PINS – An improving outlook for digital advertising has also renewed interest in Pinterest. Equally importantly, the company appears poised to take the next steps in its natural evolution to improve on monetization efforts of its valued user base. Unlike other platforms who primarily connect people with each other, many of the things people seek Pinterest for – namely ideas and inspiration – are actually products themselves. Accordingly, the company is rolling out new features that make it easier for their users to find and buy these products. And they are rolling out other new products to continue to improve user engagement as functions like Story Pins enable users to follow multiple pages of step by step instructions for things like tutorials or various DIY projects. With a still yawning gap in the important average revenue per user (ARPU) metric versus the likes of more mature peers like Facebook, continued improvement in this area could drive meaningful profitable revenue growth for years to come.”
2. Alphabet, Inc. (NASDAQ:GOOG)
No of HFs: 162
Total Value of HF Holdings: $14.7 Billion
In 2006, Google purchased YouTube for $1.65 billion and since then has been receiving many social media hits. According to investing news, they are the second most visited site in the world with a 2 billion user count worldwide. Alphabet was mentioned in the 10 Best Stocks to Buy and Hold For 5 Years According to ARK’s Cathie Wood.
In an article, Baron Opportunity Fund mentioned the stock.
“Considering solid Fund inflows, we added to long-term holding Alphabet Inc. to maintain its weighting in the portfolio. Alphabet is the parent company of Google, the world’s largest search and online advertising company. We increased our position in Alphabet this quarter as a protracted COVID-19-related recovery in travel and brand advertising presented an attractive buying opportunity. We are encouraged by improving trends in both search and YouTube, driven by durable tailwinds to e-commerce and local advertising, as well as the continued shift of video advertising dollars away from linear television as consumers increasingly cut the cable TV cord. We believe Google is becoming slightly more disciplined in capital allocation than it has been historically. Lastly, Google Cloud, which this quarter achieved a $12 billion revenue run rate under the leadership of Thomas Kurian, is having increasing success competing with larger vendors, due to its strengths in security, open-source, and data analytics.”
1. Facebook, Inc. (NASDAQ:FB)
No of HFs: 230
Total Value of HF Holdings: $29.3 Billion
The number one best social media stock to buy now is Facebook. With over 2.45 billion monthly active Facebook users registered as of Q3 2020, the social media website has become the world’s biggest social media platform. The company allows users to connect through mobile, computer, smart devices, and alike. It enables users to share opinions, photos, and activities online. FB was mentioned as one of the Top 10 Stocks Americans Searched the Most in 2020. An insider recently purchased 154 shares at around $181. The stock is up more than 49% since then.
Wedgewood Partners mentioned in an article that continued pressure from politicians and regulators keept Facebook’s earnings multiple in check.
“Facebook reported 32% growth in constant currency ad revenue, along with expectations for 50-55% growth in expenses as the Company continued with their telegraphed plan to accelerate investments in privacy and security across their social platforms. The Federal Trade Commission (FTC) also approved a $5 billion fine for violating a 2012 FTC order by misrepresenting users’ ability to control data privacy. While this removed an overhang dating back to early 2018, continued pressure from politicians and regulators kept Facebook’s earnings multiple in check.”