VanEck launched a new ETF today – the VanEck Vectors Social Sentiment ETF (BUZZ) – to track the BUZZ NextGen AI US Sentiment Leaders Index. This index consists of stocks that are generating “buzz” on traditional and social media and will trade on the New York Stock Exchange. 

One interesting aspect of BUZZ is that it’s being promoted by Barstool Sports’ founder and CEO, Dave Portnoy, who became a major stock market influencer during the coronavirus pandemic. He has a vast and influential social media presence and on Tuesday promoted BUZZ online.  

This is the second ETF that is being launched around the idea of buying stocks that are gaining traction on social media. The Sprott Buzz Social Media ETF launched in 2017 but was closed and redeemed in 2019 as it failed to generate interest among investors, averaging only $9 million in assets during its existence.

BUZZ Profile

VanEck is betting that there might be more demand to invest in an ETF that tracks stocks, popular on social media, given the huge returns and public interest in “meme stocks” discussed on social media and Reddit’s WallStreetbets. Signing on a major influencer like Portnoy with his following of millions should also lead to greater inflows this time around.

The BUZZ NextGen AI US Sentiment Leaders Index consists of 75 large-cap U.S. stocks that show the most positive investor sentiment on social media. The index selects stock using artificial intelligence tools like machine learning and natural language processing to analyze social media, news, and blogs. The portfolio is rebalanced monthly.

Some of the index’s current holdings are Virgin Galactic (SPCE), Twitter (TWTR), DraftKings (DKNG), Ford Motor Co. (F), Facebook (FB), Amazon (AMZN), and Apple (AAPL). The BUZZ Index has outperformed the S&P 500 on a variety of timeframes. Year to date, it’s up 17.9%, while the S&P 500 is 1.2% higher. Over the last year, BUZZ is 89.3% higher, while the S&P 500 has a 28.4% gain.

Portnoy’s Role

Portnoy is a shareholder in the company that created the underlying index.  Portnoy said, “”First of all, I’m not getting paid to market it, I’m not getting paid to talk about it,” Portnoy said. “I was given an ownership stake in BUZZ and then this license to VanEck, the ETF people.”

On Tuesday, Portnoy staged a mock press conference on social media, in which he discussed the ETF in a manner that was more in-line with Barstool’s ethos rather than typical Wall Street jargon.

In the past year, Portnoy became a followed stock market commentator during the pandemic as he took up day trading like so many Americans. However, some believe that Portnoy may be crossing the line into manipulation, especially since his posts can affect the index’s holdings given his reach on social media. 

Portnoy did write that “as always I must remind you I am not a financial advisor. Don’t trust anything I say about stocks. Having said that I think you’d be stupid not to invest. But what do I know? I’ve only been right for 20 years straight.”

Conclusion

While there certainly are some questions surrounding BUZZ, given the unique nature of this ETF, it’s a win-win for Portnoy and VanEck. Portnoy is finding creative and lucrative ways to monetize his audience, while VanEck is launching an ETF while public interest in “meme stocks” is off-the-charts. 

It’s also the culmination of many trends, as retail trading volume has exploded in the past year. It also highlights that ETFs have displaced mutual funds in terms of inflows, and more are cropping up to meet this demand. Finally, it hints at the future of the “influencer” economy, and the increasing variety of opportunities for those with large followings.

BUZZ is certainly an interesting concept. However, I don’t believe it’s a good fit for long-term investors. For one, it has a net expense ratio of 0.75% which is higher than many ETFs. Additionally, social media buzz might be an effective indicator of short-term strength in a stock but in the long-term, the best buying opportunities emerge when stocks are undervalued and have strong growth, not just when they’re most popular on social media. 

Therefore, it’s my opinion that BUZZ is better suited as a trading vehicle for investors who want to take advantage of specific market conditions, rather than a long-term investment.

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BUZZ shares were trading at $24.54 per share on Thursday morning, up $0.14 (+0.57%). Year-to-date, BUZZ has declined N/A%, versus a 2.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles. More...

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