BUZZ Investing: Meme-Stock Revival Powers Gains

view original post

Duncan_Andison/iStock via Getty Images

Are meme stocks back in favor? GameStop and AMC were among the largest contributors to the BUZZ Index in March.

Global equities rebounded during March, led by mega-cap shares of U.S. technology companies, as some investors believed the segment presented good value following its recent sell-off. Continued strength in the U.S. labor market led some market commentators to take a constructive view of domestic consumers’ ability to withstand elevated levels of inflation across the economy. The S&P 500 Index and the technology-heavy Nasdaq Composite Index rallied, with both indices recovering about half of their 2022 losses by the end of March. The U.S. Federal Reserve (FED) officially raised the federal funds rate target range by 25 basis points with the highly anticipated policy shift marking the first rate hike in years.

The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) gained 2.64% during the month of March compared to the S&P 500’s return of 3.71%. Year-to-date, the BUZZ Index trails the S&P 500 with returns of -16.93% and -4.60%, respectively, as of the end of March.

Meme-Stock Revival Powers Gains within the BUZZ Index

In a clear signal that a segment of investors still favor the original “meme” stocks, shares of GameStop Corp. (GME) and AMC Entertainment Holdings (AMC) rallied during the recent period between selection dates of the BUZZ Index (3/10/2022-4/13/2022). Shares of the two companies were previously hard hit as thematic and growth-oriented equities were shunned amid a large secular rotation to value-oriented equities and investors grew concerned about increasing inflation and the prospects for higher interest rates. While GameStop Chairman Ryan Cohen’s disclosed that his investment company bought 100,000 shares of the video game retailer, no other clear catalyst was evident for the recent surge, which saw GME shares rise by 50% between the BUZZ Index selection dates. Shares of iconic electric vehicle manufacturer Tesla Inc. (TSLA) surged more than 20% as investors cheered the long-awaited opening of the company’s manufacturing plant in Berlin. Deliveries rolled off the assembly lines, easing concerns that TSLA would not receive the necessary approvals to allow production to begin at its premier European manufacturing facility. The rally in TSLA shares gained momentum as the company announced that it planned a second stock split. Other hard-hit consumer and technology stocks also posted strong gains. Shares of Meta Platforms Inc. (FB), Palantir Technologies Inc. (PLTR), and Peloton Interactive Inc. (PTON) all featured among the top 10 contributors to performance during the recent period between selection dates of the BUZZ Index.

Top BUZZ Index Contributors: March 10, 2022 – April 13, 2022
Company Ticker Average Weight (%) Return Contribution (%)
GameStop Corp. GME 3.61 1.37
Tesla Inc. TSLA 3.28 0.62
AMC Entertainment Holdings AMC 3.44 0.60
Twitter Inc. TWTR 1.22 0.36
Moderna Inc. MRNA 2.53 0.32
Meta Platforms Inc. FB 3.06 0.29
Block Inc. SQ 2.10 0.27
Palantir Technologies Inc. PLTR 3.01 0.23
Peloton Interactive Inc. PTON 1.54 0.23
Apple Inc. AAPL 3.00 0.21

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

The top detractors to performance featured a range of stocks from different sectors and themes. Shares of Financial stocks underperformed, with the S&P Banks Select Industry Index falling 5.9% within the period. Online lending platforms SoFi Technologies Inc. (SOFI) and Upstart Holdings Inc. (UPST) were laggards across their peers in the Financial sector, falling 19.1% and 21.9%, respectively, landing as top detractors to performance within the BUZZ Index. Investors appear increasingly concerned about the prospects of a domestic recession induced by higher interest rates, the effects of which would negatively impact the demand for new loans as well as serviceability and default rates of existing loans. Advanced Micro Devices (AMD) fell following a downgrade by a Barclays research analyst who expressed concerns about the company’s growth prospects. Shares of the former semiconductor market darling are now trading nearly 60% below its peak levels from Q4 2021.

Bottom BUZZ Index Contributors: March 10, 2022 – April 13, 2022
Company Ticker Average Weight (%) Return Contribution (%)
SoFi Technologies Inc. SOFI 2.58 -0.55
Upstart Holdings Inc. UPST 1.67 -0.47
Novavax Inc. NVAX 2.23 -0.42
Advanced Micro Devices Inc. AMD 2.87 -0.20
DraftKings Inc. DKNG 2.75 -0.18
Coinbase Global Inc. COIN 1.43 -0.17
Rocket Cos Inc. RKT 0.69 -0.12
Salesforce Inc. CRM 1.05 -0.09
Ford Motor Co. F 1.94 -0.05
Citigroup Inc. C 0.54 -0.05

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

Sentiment Stock Highlight – General Motors

General Motors (GM) reentered the BUZZ Index during the April reconstitution with a splash. The company, which has been featured in the index at various points over the past five years, saw a dramatic increase in positive investor sentiment over the past month. Shares of the storied auto manufacturer have been under pressure throughout 2022, falling approximately 33%. As its share price has been in retreat, GM and its CEO Mary Barra have been on the offensive, touting a major overhaul as it positions for an electric future.

GM recently announced plans to roll out 30 electric vehicle (EV) models by the end of 2025, including the key launch of its highly anticipated electric truck next year to compete with the Ford F150 Lightning electric truck that has been teased to consumers since 2019. While competition in the electric segment is sure to be high, GM has demonstrated a clear commitment to the approach, recently striking a deal to buy cobalt from Glencore Plc (OTCPK:GLCNF), the top supplier of the key battery material. GLEN has already signed supply agreements with electric car market leaders Tesla and BMW. Some industry experts are of the view that securing long-term supply contracts is a critical factor in the electric vehicle segment as worries about possible future shortages mount.

General Motors Stock Price | August 2016 – April 2022

Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. For a complete list of holdings in the ETF, please visit www.vaneck.com.

BUZZ Index April 2022 Rebalance Highlights

Robinhood Markets

Over the past decade, the retail trading brokerage industry has transformed from one controlled by full-service brokerages to one filled with discount brokerages offering trading for a fraction of the cost. Retail traders have become increasingly sophisticated as market insights and trade ideas are widely discussed across many social platforms. Robinhood (HOOD) shook up the industry in 2013 when it launched as a discount brokerage offering zero commission trading. It quickly became popular with the millennial demographic, who was reaching the age of investing and managing their own money. A perfect mix of social elements along with no-cost trading helped Robinhood become one of the biggest discount brokerages in the U.S. It became the center of one of the biggest short squeezes ever in the financial markets during the GameStop saga, showcasing the power of the retail crowd when trades go “viral”. Shortly after the meme stock frenzy of 2021, Robinhood went public in a $32B IPO. After initially doubling in the two days following its debut, the stock has since declined over 80%. Sentiment, however, has been largely positive, suggesting investors are not giving up on the stock yet. This month, HOOD enters the BUZZ Index for the first time with a 2.49% weight.

Lucid Group

Today, the electric vehicle market is dominated by Tesla, which has managed to produce some of the most technologically advanced cars on the market in a variety of consumer price ranges. The company went from a niche technology company to now mass-producing hundreds of thousands of cars and was largely responsible for accelerating the industry’s shift towards EV adoption. While the major automakers have all started producing their own EVs or have plans to offer electric versions of their current vehicles, the closest competitor to Tesla in today’s market is another niche technology company, Lucid Group (LCID). Led by CEO Peter Rawlinson, former VP of Engineering at Tesla, Lucid has for years been working on its flagship luxury EV, the Lucid Air, as the main competitor to Tesla’s Model S. In February 2021, Lucid became a public company by way of a qualifying transaction of a special purpose acquisition company (SPAC). The merger was initially met with tremendous enthusiasm from investors; however, since then the stock has been extremely volatile, jumping between $20 and $50 per share as the market digested news surrounding deliveries of the Lucid Air, which began last October. The stock is once again near its lows at $20 per share, but investor sentiment has recently picked up significantly, suggesting another surge in its price may be ahead. This month, LCID is the third largest addition to the BUZZ Index with a 2.12% weight.

Important Disclosures

Company data is the source for all particular company information quoted.

Definitions: The S&P 500 is a stock market index of 500 of the largest companies listed on stock exchanges in the United States. The Nasdaq Composite Index is a stock market index that consists of the stocks that are listed on the Nasdaq stock exchange. S&P Banks Select Industry Index comprises stocks in the S&P Total Market Index that are classified in the GICS asset management & custody banks, diversified banks, regional banks, other diversified financial services and thrifts & mortgage finance sub-industries.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of 3rd party data. The information herein represents the opinion of the author(S), but not necessarily those of VanEck.

An investment in the Fund may be subject to risks which include, among others, risks related to social media analytics, investing in equity securities, medium-capitalization companies, information technology, communication services, consumer discretionary, health care and industrials sectors, market, operational, high portfolio turnover, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks.

Investing in companies based on social media analytics involves the potential risk of market manipulation because social media posts may be made with an intent to inflate, or otherwise manipulate, the public perception of a company stock or other investment. Although the Sentiment Leaders Index provider attempts to mitigate the potential risk of such manipulation by employing screens to identify posts which may be computer generated or deceptive and by employing market capitalization and trading volume criteria to remove companies which may be more likely targets for such manipulation, there is no guarantee that the Sentiment Leaders Index’s model will successfully reduce such risk. Furthermore, text and sentiment analysis of social media postings may prove inaccurate in predicting a company’s stock performance.

An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.

BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) is a product of BUZZ Holdings ULC (“BUZZ Holdings”), and has been licensed to Van Eck Associates Corporation for use in connection with the VanEck Social Sentiment ETF.

BUZZ” is a trademark of BUZZ Holdings, which has been licensed by Van Eck Associates Corporation for use in connection with the BUZZ Index.

VanEck Social Sentiment ETF is not sponsored, endorsed, sold or promoted by BUZZ Holdings, or its shareholders, or the licensor of the BUZZ Index and/or its affiliates and third party licensors. BUZZ Holdings makes no representation or warranty, express or implied, to the owners of the VanEck Social Sentiment ETF or any member of the public regarding the advisability of investing in securities generally or in VanEck Social Sentiment ETF, particularly or the ability of the BUZZ Index to track general market performance.

BUZZ Holdings’ only relationship to Van Eck Associates Corporation with respect to the BUZZ Index is the licensing of the BUZZ Index and certain trademarks of BUZZ Holdings. The BUZZ Holdings are determined and composed by BUZZ Holdings without regard to Van Eck Associates Corporation or the VanEck Social Sentiment ETF. BUZZ Holdings has no obligation to take the needs of Van Eck Associates Corporation or the owners of VanEck Social Sentiment ETF into consideration in determining and composing the BUZZ Index.

BUZZ Holdings are not responsible for and have not participated in the determination of the prices of VanEck Social Sentiment ETF or the timing of the issuance or sale of securities of VanEck Social Sentiment ETF or in the determination or calculation of the equation by which VanEck Social Sentiment ETF securities may be converted into cash, surrendered, or redeemed, as the case may be. BUZZ Holdings have no obligation or liability in connection with the administration, marketing or trading of VanEck Social Sentiment ETF. There is no assurance that investment products based on the BUZZ Index will accurately track index performance or provide positive investment returns. BUZZ Holdings is not an investment advisor and the inclusion of a security in the BUZZ Index is not a recommendation by BUZZ Holdings to buy, sell, or hold such security, nor should it be considered investment advice.

BUZZ HOLDINGS DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE BUZZ INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT THERETO, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS). BUZZ HOLDINGS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. BUZZ HOLDINGS MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY Van Eck Associates Corporation, OWNERS OF THE VanEck Social Sentiment ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BUZZ INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL BUZZ HOLDINGS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN BUZZ HOLDINGS AND Van Eck Associates Corporation, OTHER THAN THE LICENSORS OF BUZZ HOLDINGS.

Effective August 18, 2016, BUZZ Indexes Inc. implemented changes to the BUZZ NextGen AI US Sentiment Leaders Index construction rules. The index constituent count was increased from 25 to 75 stocks and the maximum constituent weight was reduce from 15% to 3%. These change may result in more a diversified exposure to index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.

The S&P 500® Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.