By Coulter Regal, CFA, Associate Product Manager
Millions of people use social media and other online platforms to express opinions and share ideas—including those related to their stock portfolio. The vast amount of content generated across these platforms contains valuable insights that can help investors gain a potential edge over the broader market.
Gaining an Edge from Social Media
Social media platforms have exploded, since first appearing in the early 2000s. In the U.S., about 80% of the population now use these platforms, up from 10% in 2008. From its start as a place to stay in touch with family and post cute baby animal pictures, social media has transformed into a real-time news outlet, often times breaking news before traditional media. Beyond just a news source, people are increasingly using them as online-communities to share opinions about stocks and other financial topics. The introduction and adoption of stock cashtags ($+ticker) as well as the creation of dedicated investment platforms, like Stocktwits, and dozens of others have helped solidify this movement and fuel the growth of investment-related online discussions. The millions of interactions across these platforms have created a rich and valuable dataset that gives insight into the potential of different stocks. This underpins a social media investing strategy that is powered by investor sentiment.
Social Insights Have Led to Outperformance vs. the S&P 500
8/18/2016 – 1/31/2021
Source: Factset, Data as of 1/31/2021. Performance data quoted represents past performance. Past performance is not a guarantee of future results. Index performance is not illustrative of fund performance. Prior to 3/02/2021, VanEck Vectors Social Sentiment ETF had no operating history. For fund performance current to the most recent month-end, visit vaneck.com.
A Strategy Powered by the People
Proponents of behavioral finance have long known that investor sentiment and emotions can have an impact on the price and performance of stocks. In today’s world, with the current state of technology and mass social media adoption, it is possible to measure social sentiment by the millions. Instead of relying on a smart friend or favorite TV pundit, one can assess millions of diverse opinions to ascertain the mood of investors—potentially even before the market as a whole realizes it. This is one reason why professional money managers have sought to gain an informational edge through market sentiment indicators, driven by social media analytics.
The BUZZ NextGen AI US Sentiment Leaders Index employs leading edge analytics to harness the collective conviction of millions of investors. The Index tracks the performance of the 75 large cap U.S. stocks that exhibit the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources, including social media, news articles, blog posts and other alternative datasets. Millions of investment related messages and posts on sites like Reddit, Stockstwits, Twitter, and others are analyzed to identify stocks with the highest future return potential. The index is dynamic and keeps the portfolio of stocks current by reviewing picks each month, dropping stocks that have declined in investor sentiment and adding others where sentiment has increased. The Index ensures quality of picks and strength of conviction by targeting only large cap stocks with seasoned message history and consistent, diverse and broad conversation.
Source: Buzz Holdings
With the launch of the VanEck Vectors® Social Sentiment ETF (BUZZ), all investors can incorporate social sentiment analytics into their portfolios, to gain an informational edge. BUZZ seeks to track as closely as possible, before fees and expenses, the price and yield performance of the BUZZ NextGen AI US Sentiment Leaders Index.
Originally published by VanEck, 3/3/21
1 Source: Edison Research; Triton Digital. March 2020
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An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) is a product of BUZZ Holdings ULC (“BUZZ Holdings”), and has been licensed to Van Eck Associates Corporation for use in connection with the VanEck Vectors Social Sentiment ETF.
“BUZZ” is a trademark of BUZZ Holdings, which has been licensed by Van Eck Associates Corporation for use in connection with the BUZZ Index.
VanEck Vectors Social Sentiment ETF is not sponsored, endorsed, sold or promoted by BUZZ Holdings, or its shareholders, or the licensor of the BUZZ Index and/or its affiliates and third party licensors. BUZZ Holdings makes no representation or warranty, express or implied, to the owners of the VanEck Vectors Social Sentiment ETF or any member of the public regarding the advisability of investing in securities generally or in VanEck Vectors Social Sentiment ETF, particularly or the ability of the BUZZ Index to track general market performance.
BUZZ Holdings’ only relationship to Van Eck Associates Corporation with respect to the BUZZ Index is the licensing of the BUZZ Index and certain trademarks of BUZZ Holdings. The BUZZ Holdings are determined and composed by BUZZ Holdings without regard to Van Eck Associates Corporation or the VanEck Vectors Social Sentiment ETF. BUZZ Holdings has no obligation to take the needs of Van Eck Associates Corporation or the owners of VanEck Vectors Social Sentiment ETF into consideration in determining and composing the BUZZ Index.
BUZZ Holdings are not responsible for and have not participated in the determination of the prices of VanEck Vectors Social Sentiment ETF or the timing of the issuance or sale of securities of VanEck Vectors Social Sentiment ETF or in the determination or calculation of the equation by which VanEck Vectors Social Sentiment ETF securities may be converted into cash, surrendered, or redeemed, as the case may be. BUZZ Holdings have no obligation or liability in connection with the administration, marketing or trading of VanEck Vectors Social Sentiment ETF. There is no assurance that investment products based on the BUZZ Index will accurately track index performance or provide positive investment returns. BUZZ Holdings is not an investment advisor and the inclusion of a security in the BUZZ Index is not a recommendation by BUZZ Holdings to buy, sell, or hold such security, nor should it be considered investment advice.
BUZZ HOLDINGS DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE BUZZ INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT THERETO, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS). BUZZ HOLDINGS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. BUZZ HOLDINGS MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY Van Eck Associates Corporation, OWNERS OF THE VanEck Vectors Social Sentiment ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BUZZ INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL BUZZ HOLDINGS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN BUZZ HOLDINGS AND Van Eck Associates Corporation, OTHER THAN THE LICENSORS OF BUZZ HOLDINGS.
Effective August 18, 2016, BUZZ Indexes Inc. implemented changes to the BUZZ NextGen AI US Sentiment Leaders Index construction rules. The index constituent count was increased from 25 to 75 stocks and the maximum constituent weight was reduce from 15% to 3%. These change may result in more a diversified exposure to index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.
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An investment in the VanEck Vectors Social Sentiment ETF (BUZZ) may be subject to risks which include, among others, risks related to social media analytics, investing in equity securities, medium-capitalization companies, information technology, communication services, consumer discretionary, health care and industrials sectors, market, operational, high portfolio turnover, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks.
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