What is the BUZZ ETF?
The investment world is buzzing about today’s release of the new BUZZ ETF – a fund that might be a potential gamechanger in the way exchange traded funds are put together.
The BUZZ ETF
BUZZ is the ticker for the VanEck Social Sentiment ETF, a new fund debuting on the NYSE today. BUZZ will invest in 75 stocks that are receiving the most positive sentiment on the internet, cleverly using artificial intelligence to crawl the web for mentions and praise for the companies within. All companies listed in the ETF must have a market cap of at least $5bn.
How does the AI work? The BUZZ Algorithm scans 15 million social media posts a month to measure which stocks have high positive investor sentiment across online social networks. Basically, it’s a social sentiment tracker.
The impetus for basing funds around online popularity comes in the wake of the GameStop short squeeze and general rise of so-called meme stocks driven by social media chatter across the past couple of months.
Meme stocks, like GameStop, AMC, and now Rocket Companies, have all been given massive attention thanks to online investor communities like the now infamous /r/Wallstreetbets turning their gaze and pushing stocks as potential investments.
What is included in the BUZZ ETF?
While it may have been birthed out of the meme stock craze, BUZZ will not contain such stocks. The $5bn minimum market cap precludes them from entry. Instead, the fund is full of many stocks that are already established multinationals.
Stocks held in BUZZ include:
- Draft Kings
- Virgin Galactic
- Advanced Micro Devices
- Plug Power
90% of the 75 companies in the ETF are split across five sectors: tech, consumer discretionary, communication services, health care, and industrials.
Is there anything controversial about BUZZ?
The involvement of Dave Portnoy, sports & pop culture website Barstool Sports owner and something of a figure head for millennial investors, owns a significant chunk of Buzz Holdings, the company behind the ETF.
Portnoy has over 2.3 million Twitter followers, coming from the world of sports betting. When sports closed during the global lockdown in 2020. During that time, he turned his attention to day trading, and has been sharing his wins with his Twitter followers and YouTube subscribers daily.
Because of his large social media network, and the fact ETF scans social posts for positive stock sentiment on its constituents, there is a possibility that if Portnoy talks up a stock, and such sentiment gets shared and talked about amongst his followers, than that stock would rise. It’s a similar principle to how places like /r/Wallstreetbets can send stocks to the moon through the power of social media.
This may cause regulatory headaches and could also result in younger, inexperienced investors losing money.
Portnoy said the algorithm was built five years ago. In 2020, the Buzz index outperformed the S&P 500 by 40%, he said.
ETFs that seek to try something different are nothing new. Cathie Wood’s ARK ETFs, for example, are all about future technologies and innovation, based on what tech could disrupt everyday life from healthcare to transport and everything in between.
What’s different about BUZZ though is its AI algorithm. While this tech has been tried before, notably in 2016 with the failed Sprott Buzz Social Media Insights ETF (ticker BUZ), the market was not responsive.
But with meme stocks and social media appealing to a new generation of investors, maybe BUZZ could make its own market buzz once it goes live.
BUZZ is due to go live on the New York Stock Exchange on March 4th 2021. Open your account to start trading or investing in the ETF has soon as it goes live.