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>>> ‘BUZZ’ ETF: White Noise Or Right Noise?

March 23, 2021

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. 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. 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. 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

Ticker Weight
AMD 3.00%
TSLA 3.00%
FB 3.00%
CGC 3.00%
AMZN 3.00%
AAPL 3.00%
GE 3.00%
SQ 3.00%
MSFT 3.00%
BA 2.67%
V 2.53%
GOOGL 2.51%
BLK 2.47%
SNAP 2.41%
NVDA 2.23%
TWTR 2.13%
MU 2.03%
BAC 1.98%
DIS 1.96%
ATVI 1.88%
GS 1.86%
SBUX 1.52%
EA 1.43%
IBM 1.31%
BHC 1.29%
GM 1.21%
TWLO 1.18%
PYPL 1.13%
XOM 1.12%
TTWO 1.11%
F 1.10%
XLNX 1.09%
TEL 1.04%
CVS 1.03%
M 1.03%
T 1.02%
SHOP 1.02%
MRK 0.99%
EXEL 0.94%
CSCO 0.93%
WMT 0.93%
NOW 0.92%
INTC 0.90%
EBAY 0.90%
BMY 0.89%
DFS 0.87%
TMUS 0.87%
VZ 0.79%
LRCX 0.78%
AAL 0.78%
GILD 0.77%
C 0.75%
CVX 0.75%
PFE 0.74%
MA 0.71%
UAA 0.70%
MTCH 0.70%
MO 0.69%
GRUB 0.69%
JPM 0.68%
LULU 0.67%
ABBV 0.67%
QCOM 0.67%
LLY 0.64%
JNJ 0.63%
WYNN 0.61%
SWKS 0.60%
REGN 0.60%
UTX 0.59%
DATA 0.58%
KO 0.58%
EXPE 0.56%
CMCSA 0.56%
A 0.55%
LMT 0.54%
Advanced Micro Devices Inc
Tesla Inc
Facebook Inc
Canopy Growth Corp Inc
Apple Inc
General Electric Co
Square Inc
Microsoft Corp
Boeing Co/The
Visa Inc
Alphabet Inc
BlackRock Inc
Snap Inc
Twitter Inc
Micron Technology Inc
Bank of America Corp
Walt Disney Co/The
Activision Blizzard Inc
Goldman Sachs Group Inc/The
Starbucks Corp
Electronic Arts Inc
International Business Machine
Bausch Health Cos Inc
General Motors Co
Twilio Inc
PayPal Holdings Inc
Exxon Mobil Corp
Take-Two Interactive Software
Ford Motor Co
Xilinx Inc
TE Connectivity Ltd
CVS Health Corp
Macy's Inc
AT&T Inc
Shopify Inc
Merck & Co Inc
Exelixis Inc
Cisco Systems Inc
Walmart Inc
ServiceNow Inc
Intel Corp
eBay Inc
Bristol-Myers Squibb Co
Discover Financial Services
T-Mobile US Inc
Verizon Communications Inc
Lam Research Corp
American Airlines Group Inc
Gilead Sciences Inc
Citigroup Inc
Chevron Corp
Pfizer Inc
Mastercard Inc
Under Armour Inc
Match Group Inc
Altria Group Inc
GrubHub Inc
JPMorgan Chase & Co
Lululemon Athletica Inc
AbbVie Inc
Eli Lilly & Co
Johnson & Johnson
Wynn Resorts Ltd
Skyworks Solutions Inc
Regeneron Pharmaceuticals Inc
United Technologies Corp
Tableau Software Inc
Coca-Cola Co/The
Expedia Group Inc
Comcast Corp
Agilent Technologies Inc
Lockheed Martin Corp

February 2021 Rebalance - BUZZ Index Constituents

Ticker Weight
TSLA 3.00%
AAPL 3.00%
SPCE 3.00%
AMD 3.00%
AMZN 3.00%
TWTR 3.00%
FB 3.00%
PLUG 3.00%
F 3.00%
NVAX 3.00%
DKNG 3.00%
NFLX 2.74%
AAL 2.27%
MSFT 2.23%
ZM 2.12%
PFE 2.11%
PINS 2.05%
MRNA 1.90%
BA 1.87%
DIS 1.86%
PENN 1.82%
SNAP 1.57%
SQ 1.54%
ON 1.51%
BHC 1.51%
NVDA 1.46%
INTC 1.45%
GM 1.41%
NKLA 1.39%
GE 1.27%
GOOGL 1.26%
PTON 1.24%
PYPL 1.23%
BYND 1.18%
UBER 1.06%
JNJ 1.04%
CRM 1.02%
JPM 1.02%
GOLD 1.02%
ROKU 0.98%
XOM 0.94%
T 0.90%
QCOM 0.88%
APPS 0.88%
GS 0.84%
SHOP 0.80%
ENPH 0.80%
CCL 0.76%
TDOC 0.75%
COTY 0.74%
BAC 0.72%
WMT 0.70%
FSLY 0.69%
KO 0.68%
ZNGA 0.67%
BLK 0.64%
V 0.62%
MS 0.61%
IBM 0.61%
TGTX 0.58%
WFC 0.57%
ETSY 0.53%
CLF 0.53%
SPG 0.50%
SBUX 0.50%
H 0.49%
NET 0.47%
SRPT 0.46%
CVS 0.45%
CAT 0.45%
CRSP 0.45%
ATVI 0.44%
GILD 0.41%
CHWY 0.41%
STX 0.40%
Tesla Inc
Apple Inc
Virgin Galactic Holdings Inc
Advanced Micro Devices Inc Inc
Twitter Inc
Facebook Inc
Plug Power Inc
Ford Motor Co
Novavax Inc
DraftKings Inc
Netflix Inc
American Airlines Group Inc
Microsoft Corp
Zoom Video Communications Inc
Pfizer Inc
Pinterest Inc
Moderna Inc
Boeing Co/The
Walt Disney Co/The
Penn National Gaming Inc
Snap Inc
Square Inc
ON Semiconductor Corp
Bausch Health Cos Inc
Intel Corp
General Motors Co
Nikola Corp
General Electric Co
Alphabet Inc
Peloton Interactive Inc
PayPal Holdings Inc
Beyond Meat Inc
Uber Technologies Inc
Johnson & Johnson Inc
JPMorgan Chase & Co
Barrick Gold Corp
Roku Inc
Exxon Mobil Corp
AT&T Inc
Digital Turbine Inc
Goldman Sachs Group Inc/The
Shopify Inc
Enphase Energy Inc
Carnival Corp
Teladoc Health Inc
Coty Inc
Bank of America Corp
Walmart Inc
Fastly Inc
Coca-Cola Co/The
Zynga Inc
BlackRock Inc
Visa Inc
Morgan Stanley
International Business Machine
TG Therapeutics Inc
Wells Fargo & Co
Etsy Inc
Cleveland-Cliffs Inc
Simon Property Group Inc
Starbucks Corp
Hyatt Hotels Corp
Cloudflare Inc
Sarepta Therapeutics Inc
CVS Health Corp
Caterpillar Inc
CRISPR Therapeutics AG
Activision Blizzard Inc
Gilead Sciences Inc
Chewy Inc
Seagate Technology PLC

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. 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. 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].