BUZZ Investing: Meme Stocks See Relief Amid Continued Macro Uncertainty

aislan13/iStock via Getty Images

Meme stocks prove to be surprisingly resilient to the recent downward move in equities; EV manufacturer Rivian Automotive Inc (RIVN) joins Tesla (TSLA) and Lucid (LCID) in the Buzz Index.

Equities extended their year-to-date losses during the recent period between selection dates (June 9, 2022, to July 14, 2022, the “Period”) of the BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”). Amid continued elevated levels of inflation, the U.S. Federal Reserve (“Fed”) raised its benchmark rate by 75bps in its most aggressive hike since 1994 while signaling future increases of the same magnitude were likely to be made throughout the rest of the year. In response, investors are increasingly pricing in the odds of a domestic recession while whispers of stagflation grow louder. Risk assets fell across the board during the period. The S&P 500® Index lost 8.3%, posting its worst June monthly performance since 2008. The index’s June performance capped off a 16.1% loss for Q2 2022, the worst quarter since 1970 and its worst start to a calendar year since 1962, with a decline of about 20%.

Other measures of risk remain elevated, yet below previously recorded ‘panic’ levels, indicating that the 2022 bear market in risk assets may not be posing systemic risk to the overall financial system. High Yield credit spreads, as measured by the Markit CDX North America High Yield Index, rose to their highest levels since the onset of the COVID-19 pandemic. The COBE VIX Index, a popular ‘fear gauge’ amongst some investors, also rose, and while the VIX remains at elevated levels, it may not yet be signaling a capitulation event which has typically been associated with VIX levels of 40 and above.

The BUZZ Index declined 13.7% during the month of June compared to a decline of 8.3% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index trails the S&P 500 with returns of -44.5% and -20.0%, respectively, as of the end of June.

Meme-related Equities Lead Advancing Stocks

Rising levels of inflation have notably impacted valuations of thematic and growth-related equities during 2022, as higher discount rates applied to lowered expectations for future growth have provided a significant one-two punch across the segment. Meme-related stocks have been among the hardest hit segment during the year, yet the cohort proved surprisingly resilient to the recent downward move in equities. Shares of AMC Entertainment Holdings Inc. (AMC), Chewy Inc. (CHWY), Roblox Corp. (RBLX), and GameStop Corp. (GME) all posted gains during the recent Period; however, despite the rally, the average trading price for those stocks remains significantly below their 52-week high, a reminder of the extent of the sell-off of the once favored segment of the market. With investor sentiment proving resilient despite the recent selloff, some wonder if the rally in meme-related stocks amidst a continued selloff across broader markets may signal a turning point and end of the current bear market.

Top BUZZ Index Contributors: June 9, 2022 – July 14, 2022
Company Ticker Average Weight (%) Return Contribution (%)
AMC Entertainment Holdings Inc AMC 3.35 0.51
Chewy Inc CHWY 0.74 0.33
ROBLOX Corp RBLX 1.42 0.23
Costco Wholesale Corp COST 1.61 0.22
Snowflake Inc SNOW 1.29 0.18
GameStop Corp GME 3.44 0.17
Boeing Co/The BA 1.59 0.16
Apple Inc AAPL 3.08 0.14
Moderna Inc MRNA 0.81 0.14
Walmart Inc WMT 1.84 0.12

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. For a complete list of holdings in the ETF, please visit www.vaneck.com.

The top detractors of the performance of the BUZZ Index featured a range of stocks primarily from the information technology, communication services and consumer discretionary sectors. Large cap technology-oriented equities were featured prominently within the top detractors of performance with chip makers Advanced Micro Devices Inc. (AMD) and Nvidia Corp (NVDA) leading declines within the cohort.

Bottom BUZZ Index Contributors: June 9, 2022 – July 14, 2022
Company Ticker Average Weight (%) Return Contribution (%)
Advanced Micro Devices Inc AMD 2.69 -0.68
Coinbase Global Inc COIN 2.13 -0.54
NVIDIA Corp NVDA 2.84 -0.48
Meta Platforms Inc META 2.68 -0.40
Shopify Inc SHOP 1.46 -0.35
PayPal Holdings Inc PYPL 1.14 -0.32
Netflix Inc NFLX 2.17 -0.30
Walt Disney Co/The DIS 1.67 -0.29
Ford Motor Co F 1.4 -0.25
Kohl’s Corp KSS 0.49 -0.24

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. For a complete list of holdings in the ETF, please visit www.vaneck.com.

Sentiment Stock Highlight – Carnival Corp.

For the past two years, the pandemic has wreaked havoc on the travel and leisure industry, as shutdowns and other restrictions have greatly reduced demand for travel. Cruise ship companies such as Carnival Corp. (CCL) were among the hardest hit as viral COVID-19 outbreaks frequently occurred across their fleets. As the world began to reopen, shares of CCL managed to recover much of their decline before concerns relating to rising inflation and soaring interest rates created an unfavorable backdrop for equities. CCL is once again trading at its March 2020 COVID-19 lows. Sentiment, however, has been trending upwards as the stock has been trending lower. With inflation at historic highs and recessionary fears on the rise, consumer spending may yet prove resilient, and spending on travel may remain strong. A potential catalyst for the cruise ship industry came this week when the CDC eliminated its COVID-19 testing requirements, which had been a major deterrent for individuals and families trying to plan trips. With this major hurdle removed, demand and bookings may increase, a dynamic which may be fueling the rise in investor sentiment towards shares of CCL. This month, CCL’s weight in the BUZZ Index rises to 2.12%, its largest weight in the Index this year.

Carnival Stock Price | January 1, 2020 – July 14, 2022

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. For a complete list of holdings in the ETF, please visit www.vaneck.com.

BUZZ Index July 2022 Rebalance Highlights

Rivian Automotive Inc.

Lucid Group Inc. was first featured within the BUZZ Index in April 2022. The technology-focused automobile company produces the Lucid Air luxury sedan, touted as a potential competitor to Tesla’s flagship Model S. With the electric vehicle (“EV”) industry rapidly growing, numerous auto manufacturers have entered the segment, and several smaller start-up companies have emerged over the past few years with their own EVs. Another widely hyped EV has been the R1T electric truck from Rivian Automotive, which was similarly regarded to LCID as being a potential competitor to market-leader Tesla. RIVN, which was formed in 2009, changed its focus to exclusively electric and autonomous vehicles in 2015, a move that helped it rapidly expand in the following years. Last September, RIVN began making deliveries of the R1T, making it the first electric pickup truck on the market. The company went public shortly thereafter, reaching a peak valuation of over $130B before succumbing to the technology and growth selloff over the past year. Shares of RIVN have subsequently declined 85%. Despite the negative stock performance, sentiment has turned positive over the past month, pushing the stock into the BUZZ Index for the first time with a 1.09% weight.

Important Disclosures

Company data is the source for all particular company information quoted.

Definitions: The S&P 500 is a stock market index of 500 of the largest companies listed on stock exchanges in the United States. The Nasdaq Composite Index is a stock market index that consists of the stocks that are listed on the Nasdaq stock exchange. S&P Banks Select Industry Index comprises stocks in the S&P Total Market Index that are classified in the GICS asset management & custody banks, diversified banks, regional banks, other diversified financial services and thrifts & mortgage finance sub-industries. Markit CDX North America High Yield Index represents one hundred liquid North American entities with high yield credit ratings as published by Markite. COBE VIX Index is a real-time market index representing the market’s expectations for volatility over the coming 30 days.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of 3rd party data. The information herein represents the opinion of the author((s)), but not necessarily those of VanEck.

An investment in the Fund may be subject to risks which include, among others, risks related to social media analytics, investing in equity securities, medium-capitalization companies, information technology, communication services, consumer discretionary, health care and industrials sectors, market, operational, high portfolio turnover, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks.

Investing in companies based on social media analytics involves the potential risk of market manipulation because social media posts may be made with an intent to inflate, or otherwise manipulate, the public perception of a company stock or other investment. Although the Sentiment Leaders Index provider attempts to mitigate the potential risk of such manipulation by employing screens to identify posts which may be computer generated or deceptive and by employing market capitalization and trading volume criteria to remove companies which may be more likely targets for such manipulation, there is no guarantee that the Sentiment Leaders Index’s model will successfully reduce such risk. Furthermore, text and sentiment analysis of social media postings may prove inaccurate in predicting a company’s stock performance.

An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.

BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index“) is a product of BUZZ Holdings ULC (“BUZZ Holdings“), and has been licensed to Van Eck Associates Corporation for use in connection with the VanEck Social Sentiment ETF.

BUZZ” is a trademark of BUZZ Holdings, which has been licensed by Van Eck Associates Corporation for use in connection with the BUZZ Index.

VanEck Social Sentiment ETF is not sponsored, endorsed, sold or promoted by BUZZ Holdings, or its shareholders, or the licensor of the BUZZ Index and/or its affiliates and third party licensors. BUZZ Holdings makes no representation or warranty, express or implied, to the owners of the VanEck Social Sentiment ETF or any member of the public regarding the advisability of investing in securities generally or in VanEck Social Sentiment ETF, particularly or the ability of the BUZZ Index to track general market performance.

BUZZ Holdings’ only relationship to Van Eck Associates Corporation with respect to the BUZZ Index is the licensing of the BUZZ Index and certain trademarks of BUZZ Holdings. The BUZZ Holdings are determined and composed by BUZZ Holdings without regard to Van Eck Associates Corporation or the VanEck Social Sentiment ETF. BUZZ Holdings has no obligation to take the needs of Van Eck Associates Corporation or the owners of VanEck Social Sentiment ETF into consideration in determining and composing the BUZZ Index.

BUZZ Holdings are not responsible for and have not participated in the determination of the prices of VanEck Social Sentiment ETF or the timing of the issuance or sale of securities of VanEck Social Sentiment ETF or in the determination or calculation of the equation by which VanEck Social Sentiment ETF securities may be converted into cash, surrendered, or redeemed, as the case may be. BUZZ Holdings have no obligation or liability in connection with the administration, marketing or trading of VanEck Social Sentiment ETF. There is no assurance that investment products based on the BUZZ Index will accurately track index performance or provide positive investment returns. BUZZ Holdings is not an investment advisor and the inclusion of a security in the BUZZ Index is not a recommendation by BUZZ Holdings to buy, sell, or hold such security, nor should it be considered investment advice.

BUZZ HOLDINGS DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE BUZZ INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT THERETO, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS). BUZZ HOLDINGS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. BUZZ HOLDINGS MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY Van Eck Associates Corporation, OWNERS OF THE VanEck Social Sentiment ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BUZZ INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL BUZZ HOLDINGS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN BUZZ HOLDINGS AND Van Eck Associates Corporation, OTHER THAN THE LICENSORS OF BUZZ HOLDINGS.

Effective August 18, 2016, BUZZ Indexes Inc. implemented changes to the BUZZ NextGen AI US Sentiment Leaders Index construction rules. The index constituent count was increased from 25 to 75 stocks and the maximum constituent weight was reduce from 15% to 3%. These change may result in more a diversified exposure to index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.

The S&P 500® Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spglobal.com/spdji/en/. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.