In light of the GameStop short squeeze, a very real retail revolution is taking place — empowered by no-commission brokerage apps and social media platforms like Twitter and Reddit. Retail investors have never been more important on markets. It’s only fitting that there’s now an ETF to track retail’s most trendy stocks: the VanEck Vectors Social Sentiment, or $BUZZ, ETF.
$BUZZ uses an algorithm to crawl news sources and social media sites such as Reddit, StockTwits, Seeking Alpha and Twitter. The algorithm will then purchase the 75 “most trendy stocks” from across these outlets. The ETF, which is based off of the BUZZ NextGen AI US Sentiment Leaders Index, was licensed by VanEck to create the new ETF.
The index’s nearly 26% annualized five-year returns sound great, beating out major indexes like the S&P 500 and NASDAQ. However, in order to sell the ETF to the untapped retail masses, VanEck tapped one of retail’s biggest characters: Barstool Sports founder Dave Portnoy. Portnoy posted a video to his Twitter to publicly back $BUZZ on Tuesday. As a result, $BUZZ is being considered “the Portnoy ETF.” The video quickly exploded, prompting a flurry of questions, reactions and thoughts from investors.
The ETF launched Thursday morning; down 1.1% at the open. To make sense of $BUZZ’s tee-off, we collected some of the best reactions and takes from retail and prominent investors. Let’s dive in:
So What's the BUZZ with Investors?
1. Dumb Money: Chris Camillo
Chris Camillo of Dumb Money, a YouTube investing channel with 100,000 subscribers, said that the $BUZZ ETF is “focused on conversational sentiment, not conversational volume.” This is positive because it increases the likelihood that the ETF cannot be ‘socially engineered’ by bots or institutions. Given that the ETF’s holdings are only updated every month, Camillo pointed out that institutions and retail investors might front run the ETF if it becomes big enough. He also indicated that front running might not matter much. The fund’s composition will not change much over the course of any year; conversational ticker sentiment "does not meaningfully fluctuate in aggregate often for mid and large-cap stocks.”
While Camillo is not buying the ETF, he shared that “if people continue to buy up meme stocks even after they are initially hyped, the ETF will kill. If not, it will get slaughtered and fall apart.”
2. Bloomberg Intelligence: Eric Balchunas
Eric Balchunas, senior ETF analyst for Bloomberg Intelligence, pointed out the historical performance of the index that the $BUZZ ETF tracks. The BUZZ NextGen AI US Sentiment Leaders Index ($BUZZTR Index) has returned an impressive nearly 25% annually since inception, which beats other prominent indexes such as the S&P 500 and NASDAQ. Balchunas also pointed out that Portnoy is the part-owner of the index company licensing the BUZZTR index to VanEck, which surely entitles him to a cut of the 0.75% expense ratio.
3. Alpha Architect: Wes Gray
Wes Gray of Alpha Architect created a cheeky Twitter poll, asking what the odds are that index providers would need to register with the SEC in light of Portnoy’s celebrity endorsement. Celebrities have caught some flack from regulators for endorsing ETFs before, leading Gray to ask if endorsements of an ETF’s underlying index might elicit the same pushback from regulators.
4. CNBC: Jim Cramer and Emily Glazer
CNBC Mad Money host Jim Cramer tweeted that the $BUZZ ETF algorithm and endorsement “fascinated” him. His fellow CNBC co-host Emily Glazer dug into $BUZZ on CNBC’s Squawk Box, saying that “social media has been applied to the past, but we don’t know the full extent of how this will all play out.” Glazer observed that retail’s love for Dave Portnoy will likely inspire a rush to trading.
5. Roundhill Investments: Will Hershey
Roundhill Investments CEO Will Hershey offered praise for VanEck securing the Portnoy partnership. In late January, Hershey tweeted out asking if anyone had a “good NLP algo for scraping social sentiment by ticker” that might be available for license. On the first day of $BUZZ trading, Hershey asked his audience who might be able to raise more money in an ETF than Portnoy. It’s fair to assume Roundhill is looking to add a retail-centric ETF to their lineup of future-thinking ETFs.
6. Social Leverage: Howard Lindzon
Social Leverage and Stocktwits founder Howard Lindzon said in an email to Bullish that the $BUZZ ETF is “an old idea whose time has come.” Stocktwits is one of the input sources for the $BUZZ algorithm.