After GameStop’s quadruple-digit, Reddit-driven rally caught institutional investors off guard in January, Wall Street is adding a new weapon to its arsenal: An exchange-traded fund that tracks stocks heating up on social media.
Here’s what to know:
What is it?
The ETF, dubbed “Buzz,” is based on the Buzz NextGen AI U.S. Sentiment Leaders Index. The index is powered by artificial intelligence that trawls social media, news articles, and blogs including Twitter, Reddit, Yahoo Finance, and StockTwits, to identify which stocks are generating hype. Its natural language processing algorithms can isolate comments about a stock, discern if the comments are positive or negative, and then rank stocks by degree of positivity and prevalence in discussions.
The algorithms are given a starting list of 250 to 350 stocks which meet two criteria: They have at least a $5 billion market capitalization, and they’ve gotten consistent, diverse mentions on social media in the past year. Each month the algorithm ranks these stocks, and the top 75 make up the index.
When does it launch?
The ETF debuted on the New York Stock Exchange today as the VanEck Vectors Social Sentiment ETF. Its top 10 holdings currently include DraftKings, Twitter, Ford, American Airlines, Facebook, Amazon, Apple, Advanced Micro Devices, Netflix, and Tesla.
How’s the buzz on “Buzz” so far?
Buzz has a high-profile cheerleader in Barstool Sports founder Dave Portnoy, who backed the ETF in its early stages and has vouched enthusiastically for it:
https://twitter.com/stoolpresidente/status/1366757688542191619
According to Portnoy, in 2020 the ETF’s index outperformed the famed S&P 500 by 40 points.
However, it’s worth noting that the ETF’s $5 billion market capitalization criteria could exclude smaller size, larger potential companies—such as GameStop, AMC Entertainment, and Express, all of which skyrocketed earlier this year thanks to campaigns from Reddit’s WallStreetBets. GameStop, which had a $1.3 billion valuation at the beginning of the year, surged 1,600% just weeks later due to targeted internet hype.
The big picture
Regardless of how the Buzz ETF fares, its creation ushers in a new era of trading—one in which the social media chatter of ordinary people is a force to be reckoned with. We’d take the long bet on that.
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