ALPS Advisors and Sprott Asset Management have come together to launch a new exchange traded fund that targets companies on their public perception and buzz on social media platforms.
The recently launched Sprott BUZZ Social Media Insights ETF (NYSEArca: BUZ) tries to reflect the performance of the BUZZ Social Media Insights Index, which identifies U.S. stocks that rank highest in terms of positive insight. These positive factors may include bullish investor perception, brand value perceptions and breadth of discussion from mentions on social media and other online media.
“The BUZZ Index seeks to identify ‘social momentum,’ a factor that we believe serves as a leading indicator to future price momentum,” Buzz Index creator Jamie Wise told ETF Trends.
The underlying index would focus on the most talked about stocks, understand the level of conversation, pick the 100 most mentioned stocks, rank the picks using a proprietary scoring model and end up with 25 stocks that exhibit the most positive insight scores on a monthly basis. Components are weighted by the so-called insight score and no security makes up more than 15% of the portfolio.
According to the fund’s prospectus sheet, the benchmark index also takes into account historic reliability and accuracy of the users that mention the security. The index would consider who is posting these conversations and how much reach they have. Users are scrutinized for their accuracy over time.
“The Sprott BUZZ Social Media Insights ETF brings together a powerful combination of social media and big data analytics,” Michael Akins, Senior V.P. and Head of ETF Strategy for ALPS Advisors, said in a press release. “Not only does the BUZZ Index measure investor sentiment, it also identifies key influencers and scores which social media members have historically been the most successful in their forecasting accuracy.”
Wise noted that big data is something we can tap into to gain insights into consumer behavior. For instance, Amazon knows your choices and the most accurate reviews to help you shop. Google helps by making the most popular pages ranked first. The same data analysis can also be applied to stock investments, Wise said.
Moreover, Wise pointed out that it has become easier to track online investment activity as more users on Twitter have adopted the so-called Cash Tags with the “$” sign in front of tickers.
“Now you can look and measure the overall feel of those stocks,” Wise said. “We can observe changes in baseline trends and how that affects stock prices.”
Currently, Wise sees trends are in favor of information technology, consumer discretionary and health care sectors. Meanwhile, investors have been losing faith in financials.
BUZ top holdings include Alphabet (NasdaqGS: GOOGL) 13.9%, Apple (NasdaqGS: AAPL) 8.1%, Alcoa (NYSE: AA) 7.6%, Walt Disney (NYSE: DIS) 6.5% and Gilead Sciences (NasdaqGS: GILD) 5.5%.
BUZ has a 0.75% expense ratio.