BUZZ Investing: Regional Bank Issues Remain in Focus
This article was originally published on ETFTrends.com.
Domestic equities traded within a narrow range as investors debated the impact of a weakening U.S. economy; mixed Q1 earnings provided no clear outlook for the market.
Domestic equities traded in a narrow range during the recent period between Index selection dates (April 13, 2023, to May 11, 2023, the “Period”) as investors appeared divided on the impact a weakening US economy will have on broader markets. Recent economic indicators, specifically within labor market conditions, may foretell a coming domestic recession while simultaneously encouraging the U.S. Federal Reserve to pause its rate hike program. U.S. Corporates reported largely mixed Q1 earnings, providing no clear indication of the economy’s prospects.
Financials remain in focus following the recent troubles in the regional banking sector. First Republic Bank (NYSE: FRC) stood out as the latest casualty within the regional bank segment. The former star private banking platform experienced deposit withdrawals en-masse while floating a plan to sell bonds and raise equity in a last-ditch effort to shore its balance sheet. Investors balked at the plan, and FRC’s stock price crumbled. Regulators seized control of FRC following the close of trading for the month of April, formalizing the second-largest bank failure in U.S. history and promptly selling its assets to JPMorgan Chase & Co. (NYSE: JPM) to restore confidence.
The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) returned -3.79% during the month of April compared to a return of 1.56% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index leads the S&P 500 with returns of 18.11% and 9.17%, respectively, as of the end of April.
Shares of DraftKings Inc. Pace Advancing Stocks within the BUZZ Index
Shares of DraftKings Inc (NASD: DKNG) paced advancing stocks within the BUZZ Index during the recent Period. The company reported a lower-than-expected first-quarter loss while guiding higher for the remainder of 2023 and indicating a path to profitability by 2024 during its fourth-quarter earnings call. Investors cheered DKNG’s renewed focus on expense management and strong customer growth and retention rates, which combined to fuel the better-than-expected results. Shares of Ottawa, Canada-based Shopify Inc (NASD: SHOP) soared by over 37% during the Period, the biggest gainer among stocks within the BUZZ Index. The e-commerce company, once viewed as a growing competitor to Amazon.com Inc (NASD: AMZN), shocked investors by announcing during its Q1 earnings call that it is selling the two biggest pieces of its fulfillment network and abandoning its logistics ambitions. The stunning strategic reversal was cheered by investors who view the decision to focus more on its retail business as a positive long-term development.
Top BUZZ Index Contributors: April 13, 2023 – May 11, 2023 | |||
Company | Ticker | Average Weight (%) | Return Contribution (%) |
DraftKings Inc | DKNG | 1.84 | 0.49 |
Shopify Inc | SHOP | 1.31 | 0.40 |
Amazon.com Inc | AMZN | 3.18 | 0.29 |
Palantir Technologies Inc | PLTR | 2.36 | 0.28 |
Datadog Inc | DDOG | 0.70 | 0.26 |
Alphabet Inc | GOOGL | 3.11 | 0.25 |
NVIDIA Corp | NVDA | 3.26 | 0.24 |
Microsoft Corp | MSFT | 3.09 | 0.22 |
Meta Platforms Inc | META | 3.25 | 0.20 |
Advanced Micro Devices Inc | AMD | 2.97 | 0.17 |
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
The top detractors of performance were led by Coinbase Global Inc (NASD COIN), whose shares fell alongside the cryptocurrency Bitcoin, which slid nearly 11% during the Period. Shares of COIN rallied more than 15% off their lows during the Period following better-than-expected Q1 results, which showed the company losing $0.34 per share, well ahead of consensus analyst estimates which called for a loss of $1.45 per share. Shares of four other Financial sector stocks were featured in the top detractors to performance, including KeyCorp (NYSE: KEY), Block Inc (NYSE: SQ), Charles Schwab Corp (NYSE: SCHW), and SoFi Technologies Inc (NASD: SOFI) as the sector remains out of favor with investors who are still cautious following the recent turmoil across US regional banks.
Bottom BUZZ Index Contributors: April 13, 2023 – May 11, 2023 | |||
Company | Ticker | Average Weight (%) | Return Contribution (%) |
Plug Power Inc | PLUG | 0.82 | -0.29 |
Block Inc | SQ | 1.23 | -0.19 |
American Airlines Group Inc | AAL | 0.66 | -0.16 |
United Airlines Holdings Inc | UAL | 0.13 | -0.12 |
Caterpillar Inc | CAT | 0.65 | -0.10 |
Alcoa Corp | AA | 0.10 | -0.09 |
Enphase Energy Inc | ENPH | 0.97 | -0.09 |
Goldman Sachs Group Inc/The | GS | 0.83 | -0.08 |
Delta Air Lines Inc | DAL | 0.11 | -0.07 |
Schlumberger NV | SLB | 0.11 | -0.07 |
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
Sentiment Stock Highlight – Chipotle Mexican Grill, Inc.
Over the past decade, few companies have been as consistent as Chipotle Mexican Grill (NYSE: CMG). As one of the premier “fast money” stocks coming out of the Global Financial Crisis, CMG was one of the top performers in the market, rising a stunning 1500% between 2008 and 2015. CMG’s meteoric rise came at a time when consumers were becoming more health-conscious, and CMG’s menu offerings catered to the healthy fast-casual segment. Its strong restaurant-level economics helped it weather the pandemic, with shares of CMG quickly rebounding following the initial COVID-19-related market crash, returning to all-time highs just two months after the March 2020 low. Even with surging inflation and rising interest rates weighing on the markets over the past year, shares of CMG have continued to outperform. Last month the company reported Q1 earnings showing rising same-store sales, double-digit growth in digital sales, and a continued expansion of operating margins. The stock jumped over 12% following the report, and positive investor sentiment increased along with the rally. This month, CMG re-enters the BUZZ Index with a 0.66% weight.
Chipotle Stock Price | January 2017 – May 2023
Source: BUZZ Holdings ULC, Bloomberg as of May 2023. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
BUZZ Index May 2023 Rebalance Highlights
First Solar, Inc.
Following the downturn in the solar sector after 2008, the market underwent over a decade of consolidation. Many smaller solar companies went bankrupt, and investor interest was stagnant. First Solar (NASDAQ: FSLR) solidified itself as a leader in the space during this time, with its lower manufacturing costs helping grow its market share relative to its peers. Over the past few years, public attention on the sector has returned as global solar demand has increased and costs have significantly declined. Once heavily reliant on government subsidies and incentives, FSLR has made significant advances in its technology in recent years, allowing it to expand to larger-scale projects and begin growing through acquisitions. The stock has tripled in just the past year on the back of accelerating sales growth, record backlogs, and strong forecasted demand over the next several years. Positive investor sentiment has been climbing as well, and FSLR joins the Index this month with a 0.42% weight.
For more on rebalancing results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.
Originally published by VanEck on May 22, 2023.
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