A recently launched social media insights exchange traded fund (ETF) provides investors with a social momentum strategy that harnesses insights from big data mined from media outlets.
On a recent webcast, The Social Media Index: Today’s Market Sentiment Indicator, Jeremy Held, Director of Research & Investment Strategy at ALPS Portfolio Solutions, explained that the Sprott BUZZ Social Media Insights ETF (NYSEArca: BUZ) analyzes social media data to single out bullish investment perceptions on certain brands or companies.
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Mining consumer data is nothing new, but using data analytics in an ETF index-based strategy is.
“Consumer product companies were the first to effectively use predictive analysis from social media to help them identify marketing insights and gain competitive advantages,” Jamie Wise, CEO and Founder of Buzz Indexes, said.
The investment industry has taken notice, implementing its own brand of data analytics. For instance, hedge funds, quantitative and fundamental managers are looking to social media analytics to enhance the investment process, Wise said. Bloomberg and Thompson Reuters now offer social analytics on their data terminals.
The Social Media Insights ETF also utilizes social analytics, identifying U.S. stocks with the most positive insights collected from social media.
[related_stories]Specifically, BUZ’s underlying index covers over 50 million unique stock-specific data points from social media comments, news articles and blog posts, including media outlets like Twitter, Reddit, CNN Money, Motley Fool, The Wall Street Journal, Yahoo, Google, Bloomberg and Facebook, among others.
The fund’s index then whittles down its pool of potential picks to the top 100 most mentioned stocks with market caps of over $5 billion across social media.
“The more active the conversation, the greater the reliability of the buzz,” Wise said.
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The BUZZ Social Media Insights Index also identifies multi factors to select 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 index would then end up with 25 stocks that exhibit the most positive insight scores on a monthly basis.
“Stock selection will dynamically shift with the buzz,” Held added. “Sector allocations are a by-product with no constraints.”
Financial advisors who are interested in learning more about the social media strategy can watch the webcast here on demand.
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