What is the BUZZ Social Sentiment ETF

What is the BUZZ ETF?

The VanEck Vectors Social Sentiment ETF (BUZZ) is a fund that tracks the price and performance of the BUZZ NextGen AI US Sentiment Leaders Index (BUZZTR). The BUZZ ETF listed on the New York Stock Exchange on 4 March 2021.

The BUZZTR is an index which is designed to track the performance of the 75 large-cap US stocks that receive the most positive, bullish investor sentiment based on online content sources. This includes social media, news articles, blog posts and other online datasets. The BUZZ ETF will then hold stocks dependent on the constituents in the index itself.

So, in theory, the BUZZ index and ETF will track discussions on the likes of Twitter, Reddit and StockTwits – sites that a lot of retail traders have been using as sounding boards for their strategies, and even to coordinate moves on financial markets.

BUZZ ETF and GamesStop

The ETF’s launch comes just over a month after a group of Reddit users collectively drove up the price of GameStop shares to a $5 billion valuation, pushing Wall Street investors into a short squeeze.

While GameStop doesn’t currently meet the criteria for the BUZZ index, the rise of the Reddit trader has led many to believe the new ETF is part of an effort to capitalise on and track the these so called ‘hype stocks’. 

How is BUZZ calculated?

The BUZZ ETF is an actively managed fund – meaning it has to be regularly monitored and altered to reflect any changes to the top 75 stocks.

The methodology of the index that the BUZZ ETF tracks is different to most funds thanks to its artificially intelligent (AI) system. The BUZZRT algorithm monitors 15 million posts a month and uses natural language processing to isolate comments about a stock. The AI can then identify if the comments are positive or negative, and then rank these stocks by degree of bullish sentiment and prevalence in discussion forums.

Supposedly, this algorithm churns out over 250 stocks. So, to be featured on the index and ETF, companies must have a market capitalisation of at least $5 billion and a ‘positive insight score’ for a twelve-month period. This is to filter out shorter-term trends, such as GameStop.

The price of the BUZZTR Index is calculated each business day based on the most recent prices of all index components from their respective exchanges. It’s calculated every 15 seconds from 9:30am to 16:30pm (EST) – which is 2:30pm to 9:30pm (GMT).

What companies does the BUZZ ETF track?

There are 75 companies included in the BUZZ ETF. As of 5 March 2021, the top 10 holdings by market value (and consequently weight on the ETF) are:

The companies in the BUZZ ETF span a range of sectors, including:

• Information Technology (23.5%)
• Consumer Discretionary (19.7%)
• Communication Services (18.8%)
• Industrials (13.5%)
• Health Care (11.2%)
• Financials (5.1%)
• Consumer Staples (3.3%)
• Materials (1.4%)
• Energy (1.1%)
• Real Estate (0.6%)
• Other/Cash (1.9%)

What are the risks of BUZZ?

The main criticism of the BUZZ ETF is that ‘bullish’ or ‘positive’ sentiment as a methodology isn’t necessarily a risk-free idea – as it relies on the concepts of herd behaviour and popularism rather than a company’s fundamentals.

While most of the index’s constituents are currently large, household names (such as Twitter, Facebook, Amazon and Tesla) there is always the chance that companies with less financial stability will make their way onto the list.

We just have to look at the rise of Reddit stocks in early 2021 to see that a bullish trend doesn’t have to be based on a strong balance sheet. When retail traders pushed GameStop up to the $5 billion valuation mark, it would’ve met half the index’s inclusion criteria. Should GameStop continue to trend over the coming months, the BUZZ asset managers will be forced to include it.

If too many stocks with little financial credibility make their way onto the ETF, it’s difficult to see how it can be a long-term investment. However, according to Dave Portnoy – Barstool Sports founder and BUZZ ETF backer – the Buzz NextGen AI U.S. Sentiment Leaders Index outperformed the S&P 500 by 40% in 2020. And if that was before the rise of the social media investors, who knows what will happen to the ETF’s returns going forward.

How to trade the BUZZ ETF

Whatever the future performance of the BUZZ ETF, it presents a unique opportunity for speculators – especially those using derivatives such as CFDs. Being able to go long or short on such a huge range of popular shares at once is an interesting way to get exposure to what is essentially the ‘popular stock market’ from a single trade.

Although it’s worth noting that, overall, popularity is the only thing tying these companies together, which means there are a huge range of other factors that will drive their individual share prices.

You can trade the BUZZ ETF via CFDs with us. All you need to do is:

1. Open an account
2. Search ‘BUZZ’ or ‘Vaneck Vector Soc Sent ETF’ in our platform
3. Decide whether to go long or short
4. Enter your position and monitor the market