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‘BUZZ’ ETF: White Noise Or Right Noise?

·11 min read
Jamie Wise
Jamie Wise

Measuring stock market sentiment has been both a pursuit of many—from traders to academia—and a holy grail of sorts. There’s a train of thought that investors are influenced by sentiment, despite fundamentals, and that to bet against investor sentiment can be risky.

Market sentiment indicators are used all the time: VIX, high/low index, bullish percent index, moving averages, etc. And while those give the overall flavor of the market’s tenor—bullish, bearish, lukewarm—selecting individual stocks based on sentiment has been an impossible knot.

Now, thanks to the internet, singular thoughts and idea are more easily captured—a silver or rusted lining depending on your viewpoint. And by screening for stock tickers using hashtags on social media sites like Twitter and Stocktwits, one index provider believes it has built a better sentiment mousetrap as the internet matures into adulthood.
 

‘BUZZ’ Is Back

This month, the VanEck Vectors Social Sentiment ETF (BUZZ) was launched, and did so with a bang. The fund has gathered $500 million in assets in two weeks, thanks to circuslike environment the fund was launched under.

David Portnoy, founder of Barstool Sports and the newest market gadfly, is one of the financial backers of BUZZ and its index created by Buzz Holdings. And he took to Twitter to pitch BUZZ’s launch in car-salesman style to the delight of his followers and the public, and to the horror of the Wall Street “suits.”

But as the Portnoy publicity circus has died down and a half-billion dollars has been entrusted to the fund to make money for its investors, we thought it was time to sit down with Jamie Wise, CEO of Buzz Holdings, who has been developing BUZZ’s index to measure sentiment on individual stocks.

The first go-round for “BUZZ” was in 2016, with the launch of the Sprott Buzz Social Media Insights ETF (BUZ). It was among the first ETFs to rely on artificial intelligence in its underlying index, but it closed in 2019 with a scant $10 million in AUM after three years. Maybe BUZ was ahead of its time five years ago, or maybe just not having a Portnoy publicity machine made the difference.

But as one of the fastest-growing funds in the history of U.S.-listed ETFs, “BUZZ” looks like it will be circling for a while.

ETF.com: The index behind “BUZZ” (the BUZZ NextGen AI US Sentiment Leaders Index) has been your passion and life’s work. What’s the story?

Jamie Wise: “BUZZ” really started because I saw people on social media platforms [I use]—namely Stocktwits and Twitter—talking about stocks. At first I had a misconception that probably the people talking on Twitter or Stocktwits are only talking about super-risky, high growth, to-the-moon-type stocks.

But then, once I peeled that first layer back, I realized there was real thread of diversity to the conversation, and wouldn't it be interesting to sort of get a read of the temperature of that conversation?

Sentiment has always been something that fascinated me. You’re trained in the investment world to think of sentiment as something contrarian. The problem is, it was never measurable. You have all these polls, and we know the problems with the polling. We have all these proxy indicators that people could point to, whether it was the VIX, or put/call ratios, things of that nature, but that’s more on a macro level.

When it came to stock-specific sentiment, it was really just someone's opinion on CNBC, frankly. I could get on a show, and pick up the microphone, and say, “Sentiment in XYZ stock is high or low.” But really, they have no data to confirm that, other than maybe conversations that person had with their own network, or they're looking at a stock chart, or what have you.

Back in 2014, we started the project to measure sentiment at the individual-security level.

ETF.com Would it be fair to say you're really measuring social media that's focused on stocks?

Wise: Yes. Ten years ago or so, this kind of communication didn't exist. Yes, there were the early online chat boards and message boards. They were very focused on maybe a handful of stocks. And the diversity of people on those things was unbelievably low.

It would have been nice to say, “Yeah, there's 10, 15, 20 years of history, since the internet has been around, there’ve been people talking about stocks on the internet in a broad and diverse way,” but that's just not the case at all.

You don't get any real data until the early part of the 2010s. And even then, it's much, much narrow than it is today. By 2015, though, it was robust. We were looking at 2 million posts a month that our algorithms were processing back when the “BUZ” first launched, which we thought was a lot of data then.

Today we’re looking at more than 20 million posts a month. There’s been just unbelievable growth and message volume, and participants, and diversity of opinions and diversity of trading styles. All of those things help to represent the collective, which just gives a wider lens for us to screen for potential sentiment names.

ETF.com: What were the top 10 holdings when you closed BUZ? And what were the top 10 holdings when you just opened BUZZ?

Wise: They're definitely not going to be the same. And it's not because the models have changed. It's more just the diversity of stocks being talked about.

February 2019 Rebalance - BUZZ Index Constituents

Company

Ticker

Weight

Advanced Micro Devices Inc

AMD

3.00%

Tesla Inc

TSLA

3.00%

Facebook Inc

FB

3.00%

Canopy Growth Corp

CGC

3.00%

Amazon.com Inc

AMZN

3.00%

Apple Inc

AAPL

3.00%

General Electric Co

GE

3.00%

Square Inc

SQ

3.00%

Microsoft Corp

MSFT

3.00%

Boeing Co/The

BA

2.67%

Visa Inc

V

2.53%

Alphabet Inc

GOOGL

2.51%

BlackRock Inc

BLK

2.47%

Snap Inc

SNAP

2.41%

NVIDIA Corp

NVDA

2.23%

Twitter Inc

TWTR

2.13%

Micron Technology Inc

MU

2.03%

Bank of America Corp

BAC

1.98%

Walt Disney Co/The

DIS

1.96%

Activision Blizzard Inc

ATVI

1.88%

Goldman Sachs Group Inc/The

GS

1.86%

Starbucks Corp

SBUX

1.52%

Electronic Arts Inc

EA

1.43%

International Business Machine

IBM

1.31%

Bausch Health Cos Inc

BHC

1.29%

General Motors Co

GM

1.21%

Twilio Inc

TWLO

1.18%

PayPal Holdings Inc

PYPL

1.13%

Exxon Mobil Corp

XOM

1.12%

Take-Two Interactive Software

TTWO

1.11%

Ford Motor Co

F

1.10%

Xilinx Inc

XLNX

1.09%

TE Connectivity Ltd

TEL

1.04%

CVS Health Corp

CVS

1.03%

Macy's Inc

M

1.03%

AT&T Inc

T

1.02%

Shopify Inc

SHOP

1.02%

Merck & Co Inc

MRK

0.99%

Exelixis Inc

EXEL

0.94%

Cisco Systems Inc

CSCO

0.93%

Walmart Inc

WMT

0.93%

ServiceNow Inc

NOW

0.92%

Intel Corp

INTC

0.90%

eBay Inc

EBAY

0.90%

Bristol-Myers Squibb Co

BMY

0.89%

Discover Financial Services

DFS

0.87%

T-Mobile US Inc

TMUS

0.87%

Verizon Communications Inc

VZ

0.79%

Lam Research Corp

LRCX

0.78%

American Airlines Group Inc

AAL

0.78%

Gilead Sciences Inc

GILD

0.77%

Citigroup Inc

C

0.75%

Chevron Corp

CVX

0.75%

Pfizer Inc

PFE

0.74%

Mastercard Inc

MA

0.71%

Under Armour Inc

UAA

0.70%

Match Group Inc

MTCH

0.70%

Altria Group Inc

MO

0.69%

GrubHub Inc

GRUB

0.69%

JPMorgan Chase & Co

JPM

0.68%

Lululemon Athletica Inc

LULU

0.67%

AbbVie Inc

ABBV

0.67%

QUALCOMM Inc

QCOM

0.67%

Eli Lilly & Co

LLY

0.64%

Johnson & Johnson

JNJ

0.63%

Wynn Resorts Ltd

WYNN

0.61%

Skyworks Solutions Inc

SWKS

0.60%

Regeneron Pharmaceuticals Inc

REGN

0.60%

United Technologies Corp

UTX

0.59%

Tableau Software Inc

DATA

0.58%

Coca-Cola Co/The

KO

0.58%

Expedia Group Inc

EXPE

0.56%

Comcast Corp

CMCSA

0.56%

Agilent Technologies Inc

A

0.55%

Lockheed Martin Corp

LMT

0.54%

 

 

100.00%

 

February 2021 Rebalance - BUZZ Index Constituents

Company

Ticker

Weight

Tesla Inc

TSLA

3.00%

Apple Inc

AAPL

3.00%

Virgin Galactic Holdings Inc

SPCE

3.00%

Advanced Micro Devices Inc

AMD

3.00%

Amazon.com Inc

AMZN

3.00%

Twitter Inc

TWTR

3.00%

Facebook Inc

FB

3.00%

Plug Power Inc

PLUG

3.00%

Ford Motor Co

F

3.00%

Novavax Inc

NVAX

3.00%

DraftKings Inc

DKNG

3.00%

Netflix Inc

NFLX

2.74%

American Airlines Group Inc

AAL

2.27%

Microsoft Corp

MSFT

2.23%

Zoom Video Communications Inc

ZM

2.12%

Pfizer Inc

PFE

2.11%

Pinterest Inc

PINS

2.05%

Moderna Inc

MRNA

1.90%

Boeing Co/The

BA

1.87%

Walt Disney Co/The

DIS

1.86%

Penn National Gaming Inc

PENN

1.82%

Snap Inc

SNAP

1.57%

Square Inc

SQ

1.54%

ON Semiconductor Corp

ON

1.51%

Bausch Health Cos Inc

BHC

1.51%

NVIDIA Corp

NVDA

1.46%

Intel Corp

INTC

1.45%

General Motors Co

GM

1.41%

Nikola Corp

NKLA

1.39%

General Electric Co

GE

1.27%

Alphabet Inc

GOOGL

1.26%

Peloton Interactive Inc

PTON

1.24%

PayPal Holdings Inc

PYPL

1.23%

Beyond Meat Inc

BYND

1.18%

Uber Technologies Inc

UBER

1.06%

Johnson & Johnson

JNJ

1.04%

salesforce.com Inc

CRM

1.02%

JPMorgan Chase & Co

JPM

1.02%

Barrick Gold Corp

GOLD

1.02%

Roku Inc

ROKU

0.98%

Exxon Mobil Corp

XOM

0.94%

AT&T Inc

T

0.90%

QUALCOMM Inc

QCOM

0.88%

Digital Turbine Inc

APPS

0.88%

Goldman Sachs Group Inc/The

GS

0.84%

Shopify Inc

SHOP

0.80%

Enphase Energy Inc

ENPH

0.80%

Carnival Corp

CCL

0.76%

Teladoc Health Inc

TDOC

0.75%

Coty Inc

COTY

0.74%

Bank of America Corp

BAC

0.72%

Walmart Inc

WMT

0.70%

Fastly Inc

FSLY

0.69%

Coca-Cola Co/The

KO

0.68%

Zynga Inc

ZNGA

0.67%

BlackRock Inc

BLK

0.64%

Visa Inc

V

0.62%

Morgan Stanley

MS

0.61%

International Business Machine

IBM

0.61%

TG Therapeutics Inc

TGTX

0.58%

Wells Fargo & Co

WFC

0.57%

Etsy Inc

ETSY

0.53%

Cleveland-Cliffs Inc

CLF

0.53%

Simon Property Group Inc

SPG

0.50%

Starbucks Corp

SBUX

0.50%

Hyatt Hotels Corp

H

0.49%

Cloudflare Inc

NET

0.47%

Sarepta Therapeutics Inc

SRPT

0.46%

CVS Health Corp

CVS

0.45%

Caterpillar Inc

CAT

0.45%

CRISPR Therapeutics AG

CRSP

0.45%

Activision Blizzard Inc

ATVI

0.44%

Gilead Sciences Inc

GILD

0.41%

Chewy Inc

CHWY

0.41%

Seagate Technology PLC

STX

0.40%

 

 

100.00%

 

The most important difference between then and now is the investment industry understands that the social media platforms are a real thing. It's not a gimmicky thing, and it's not a promotional thing.

We heard a lot of, “Why do I care what Sally from Indiana has to say about Microsoft?” And we always champion that answer with, “Sally and the millions of others like her are a lot smarter than you give them credit for. And they have tools and assets to research, and really push each other. And collectively, they can make really good decisions.”

People sort of scoffed at that. That was a long traditional bias of investment professionals. I think that was absolutely the case five years ago. Today people have a much more open mind with respect to understanding that, collectively, these communities are probably a lot smarter than they give them credit for, historically.

ETF.com: Why is GameStop not included in the index? It would seem to be the poster child for this kind of screener.

Wise: As per the index guideline, there is a multistep process to determine if a stock is eligible to be considered for inclusion in the BUZZ Index. The eligibility determination occurs quarterly, and the list of eligible stocks remains in effect until the next quarterly determination, through three monthly rebalances. To be eligible for inclusion, a stock must meet the following criteria:

  • Security must be a common stock traded on a major U.S. exchange

  • Security must have a minimum market capitalization of at least $5 billion

  • Security must have a three-month minimum average daily trading volume of at least $1 million

GME failed to meet the $5 billion market cap on the January eligible universe screen. The next eligible universe screen occurs on April 1. To qualify as eligible, a security must meet a minimum-mentions threshold that incorporates a rolling four-quarter review of “mentions” data.

ETF.com: Who owns this index?

Wise: BUZZ Holdings is the entity that owns the index. We are the creators of the IP [intellectual property]. BUZZ Holdings has the right to license use of that index for investment vehicles. That’s the relationship that BUZZ Holdings currently has with VanEck [and Portnoy].

Drew Voros can be reached at dvoros@etf.com

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