There has been plenty of “buzz” about recent stock market events, mainly the sudden rise of GameStop, AMC Entertainment, and others. Following such hype, an exchange-traded fund (ETF) has been created around the underlying principles that investors believe may have an impact on stocks in the future.
There’s an [ETF] for that
Last week, VanEck opened an ETF with Buzz Indexes called the Social Sentiment ETF, a fund that is “intended to track the performance of the 75 large cap U.S. stocks which exhibit the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources including social media, news articles, blog posts and other alternative datasets.”
What does this translate to? Simply stated, the fund will utilize artificial intelligence to analyze online content and determine investors’ most favorable stocks.
This idea was originally started in 2016 by Buzz Indexes. However, the 2016 version of the fund failed to garner enough investor interest and subsequently shut down in 2019.
Now, after millions of people witnessed the markets unfold the way they did last month, it is clear that there is a heightened interest in the fund. According to Bloomberg, the BUZZ ETF was “the third best ETF debut on record,” with nearly $438 million changing hands last Thursday alone.
What’s in it?
For the BUZZ ETF to break records like this, one would imagine that the fund would contain a number of undervalued and overlooked companies that are poised to skyrocket. GameStop and AMC were two of the most notable stocks that were up exponentially within just one month.
However, neither stock is held in this ETF as of its debut last week. The top daily holdings in the BUZZ ETF as a percentage of net assets include Ford (F), DraftKings (DKNG), Twitter (TWTR), Facebook (FB), American Airlines (AAL), Amazon (AMZN), and Apple (AAPL). Of course, these stocks are subject to change based on management’s artificial intelligence findings that certain companies are experiencing positive or negative social sentiment.
Most of the top holdings in the ETF are some of the world’s largest companies. They are certainly in a much different position than companies like GameStop, AMC, and others. Some are wondering whether the ETF debuted so well because it was well-marketed, especially by Barstool Sports founder Dave Portnoy, a notable promoter of the ETF. Others believe that the ETF was well-funded because it takes a different approach that may actually prove to be more effective than traditional stock picking.
Jamie Wise, CEO of Buzz Indexes and originator of the index, says that this is not about recent buzz around “meme stocks,” but rather it is about “the broader conversation around stocks mentioned on social media platforms.”
Wise also said that the holdings in BUZZ are not being “promoted by celebrities.” Instead, Wise says, “These are everyday stocks being promoted by people with a wide variety of viewpoints, and is not focused on a narrow group of Reddit names.”
Perhaps this is a better explanation of the ETF than others may see on the surface. While it seems uncanny that the idea comes out shortly after the GameStop and AMC craze, the ETF originated in 2016, as previously mentioned. While Wise emphasizes that the ETF is not based on the Reddit phenomenon we saw last month, the ETF is utilizing the underlying principles of using social media and other similar sources for data. This is an interesting development to analyze over the next few months and years as markets continue to move.