BUZZ Investing: Meme-Stock Revival Powers Gains

Are meme stocks back in favor? GameStop and AMC were among the largest contributors to the BUZZ Index in March.

Global equities rebounded during March, led by mega-cap shares of U.S. technology companies, as some investors believed the segment presented good value following its recent sell-off. Continued strength in the U.S. labor market led some market commentators to take a constructive view of domestic consumers’ ability to withstand elevated levels of inflation across the economy. The S&P 500 Index and the technology heavy Nasdaq Composite Index rallied, with both indices recovering about half of their 2022 losses by the end of March. The U.S. Federal Reserve (Fed) officially raised the federal funds rate target range by 25 basis points with the highly anticipated policy shift marking the first rate hike in years.

The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) gained 2.64% during the month of March compared to the S&P 500’s return of 3.71%. Year to date, the BUZZ Index trails the S&P 500 with returns of -16.93% and -4.60%, respectively, as of the end of March.

Meme-Stock Revival Powers Gains within the BUZZ Index

In a clear signal that a segment of investors still favor the original “meme” stocks, shares of GameStop Corp. (GME) and AMC Entertainment Holdings (AMC) rallied during the recent period between selection dates of the BUZZ Index (3/10/2022-4/13/2022). Shares of the two companies were previously hard hit as thematic and growth-oriented equities were shunned amid a large secular rotation to value-oriented equities and investors grew concerned about increasing inflation and the prospects for higher interest rates. While GameStop Chairman Ryan Cohen’s disclosed that his investment company bought 100,000 shares of the video game retailer, no other clear catalyst was evident for the recent surge, which saw GME shares rise by 50% between the BUZZ Index selection dates. Shares of iconic electric vehicle manufacturer Tesla Inc. (TSLA) surged more than 20% as investors cheered the long-awaited opening of the company’s manufacturing plant in Berlin. Deliveries rolled off the assembly lines, easing concerns that TSLA would not receive the necessary approvals to allow production to begin at its premier European manufacturing facility. The rally in TSLA shares gained momentum as the company announced that it planned a second stock split. Other hard-hit consumer and technology stocks also posted strong gains. Shares of Meta Platforms Inc. (FB), Palantir Technologies Inc. (PLTR), and Peloton Interactive Inc. (PTON) all featured among the top 10 contributors to performance during the recent period between selection dates of the BUZZ Index.

 

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 to performance featured a range of stocks from different sectors and themes. Shares of Financial stocks underperformed, with the S&P Banks Select Industry Index falling 5.9% within the period. Online lending platforms SoFi Technologies Inc. (SOFI) and Upstart Holdings Inc. (UPST) were laggards across their peers in the Financial sector, falling 19.1% and 21.9%, respectively, landing as top detractors to performance within the BUZZ Index. Investors appear increasingly concerned about the prospects of a domestic recession induced by higher interest rates, the effects of which would negatively impact the demand for new loans as well as serviceability and default rates of existing loans. Advanced Micro Devices (AMD) fell following a downgrade by a Barclays research analyst who expressed concerns about the company’s growth prospects. Shares of the former semiconductor market darling are now trading nearly 60% below its peak levels from Q4 2021.

 

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 – General Motors

General Motors (GM) reentered the BUZZ Index during the April reconstitution with a splash. The company, which has been featured in the index at various points over the past five years, saw a dramatic increase in positive investor sentiment over the past month. Shares of the storied auto manufacturer have been under pressure throughout 2022, falling approximately 33%. As its share price has been in retreat, GM and its CEO Mary Barra have been on the offensive, touting a major overhaul as it positions for an electric future.

GM recently announced plans to roll out 30 electric vehicle (EV) models by the end of 2025, including the key launch of its highly anticipated electric truck next year to compete with the Ford F150 Lightning electric truck that has been teased to consumers since 2019. While competition in the electric segment is sure to be high, GM has demonstrated a clear commitment to the approach, recently striking a deal to buy cobalt from Glencore Plc (GLEN), the top supplier of the key battery material. GLEN has already signed supply agreements with electric car market leaders Tesla and BMW. Some industry experts are of the view that securing long-term supply contracts is a critical factor in the electric vehicle segment as worries about possible future shortages mount.

General Motors Stock Price | August 2016 – April 2022

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.

BUZZ Index April 2022 Rebalance Highlights

Robinhood Markets

Over the past decade, the retail trading brokerage industry has transformed from one controlled by full-service brokerages to one filled with discount brokerages offering trading for a fraction of the cost. Retail traders have become increasingly sophisticated as market insights and trade ideas are widely discussed across many social platforms. Robinhood (HOOD) shook up the industry in 2013 when it launched as a discount brokerage offering zero commission trading. It quickly became popular with the millennial demographic, who was reaching the age of investing and managing their own money. A perfect mix of social elements along with no-cost trading helped Robinhood become one of the biggest discount brokerages in the U.S. It became the center of one of the biggest short squeezes ever in the financial markets during the GameStop saga, showcasing the power of the retail crowd when trades go “viral”. Shortly after the meme stock frenzy of 2021, Robinhood went public in a $32B IPO. After initially doubling in the two days following its debut, the stock has since declined over 80%. Sentiment, however, has been largely positive, suggesting investors are not giving up on the stock yet. This month, HOOD enters the BUZZ Index for the first time with a 2.49% weight.

Lucid Group

Today, the electric vehicle market is dominated by Tesla, which has managed to produce some of the most technologically advanced cars on the market in a variety of consumer price ranges. The company went from a niche technology company to now mass-producing hundreds of thousands of cars and was largely responsible for accelerating the industry’s shift towards EV adoption. While the major automakers have all started producing their own EVs or have plans to offer electric versions of their current vehicles, the closest competitor to Tesla in today’s market is another niche technology company, Lucid Group (LCID). Led by CEO Peter Rawlinson, former VP of Engineering at Tesla, Lucid has for years been working on its flagship luxury EV, the Lucid Air, as the main competitor to Tesla’s Model S. In February 2021, Lucid became a public company by way of a qualifying transaction of a special purpose acquisition company (SPAC). The merger was initially met with tremendous enthusiasm from investors; however, since then the stock has been extremely volatile, jumping between $20 and $50 per share as the market digested news surrounding deliveries of the Lucid Air, which began last October. The stock is once again near its lows at $20 per share, but investor sentiment has recently picked up significantly, suggesting another surge in its price may be ahead. This month, LCID is the third largest addition to the BUZZ Index with a 2.12% weight.

For more on rebalance results and a full breakdown of index constituents added and removed for the month, view the BUZZ Index reconstitution report.

Originally published by VanEck on April 29, 2022.

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