BUZZ Investing: Meme-Stocks Make A Comeback
Summary
- The prospect of peak inflation has re-ignited the battered growth and meme stock craze in names such as Coinbase Global and AMC Entertainment Holdings in the Buzz Index.
- Longer-dated treasuries rallied alongside equities following Powell’s comments, with the yield on the benchmark U.S. ten-year bond falling, flattening out the yield curve relative to the 2.5% short-term level of the Federal Funds Target Rate.
- Much like traditional equities, the cryptocurrency markets have been steadily declining since the beginning of the year. Crypto-related stocks such as Coinbase and MicroStrategy were down 80% and 65%, respectively, before bouncing last month.
Duncan_Andison
The prospect of peak inflation has re-ignited the battered growth and meme stock craze in names such as Coinbase Global Inc (COIN) and AMC Entertainment Holdings (AMC) in the Buzz Index.
Equities rebounded as investors reset their expectations regarding the prospects for continued elevated levels of inflation and the probability of a domestic recession. The BUZZ NextGen AI US Sentiment Leaders Index (the "BUZZ Index" or "Index") gained 21.8% during the recent period between Index selection dates (July 14, 2022, to August 11, 2022, the "Period"), outpacing gains recorded by the S&P 500 Index by over ten percentage points. The rally was partly fueled by dovish remarks from the U.S. Federal Reserve Chair Jerome Powell during a news conference that followed the central bank's second consecutive seventy-five basis point ("bps") increase of its target rate. Powell noted that "while another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then," while adding, "as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases."
Longer-dated treasuries rallied alongside equities following Powell's comments, with the yield on the benchmark U.S. ten-year bond falling, flattening out the yield curve relative to the 2.5% short-term level of the Federal Funds Target Rate. Other measures of risk reset amidst the bullish macro environment. High yield credit spreads measured by the Markit CDX North America High Yield Index, and the CBOE Volatility Index (the "VIX") fell. Despite the 'risk-on' gains across the landscape, the U.S. dollar continued its advance against a basket of currencies, notably trading above parity with the Euro for the first time in nearly twenty years.
The BUZZ Index returned 14.7% during the month of July compared to a return of 9.2% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index trails the S&P 500 with returns of -36.5% and -12.6%, respectively, as of the end of July.
Strength In Growth And Meme-Related Equities
Shares of some of the hardest hit segments of the market rallied sharply as technology, growth-oriented, and meme-related equities rocketed higher during the period. Meme stocks were led by AMC Entertainments Holdings, with shares of the nation's largest movie chain operator advancing 69% during the Period. Fueling gains in the stock was the announcement of a special distribution to AMC shareholders. AMC Preferred Equity Units (dubbed "APE" in a nod to the investors who turned the company into a meme stock and often refer to themselves as "ape nation.") will list under the ticker APE on the New York Stock Exchange. Coinbase Global Inc jumped 57% during the period. The leading platform for cryptocurrency trading soared after announcing a partnership with BlackRock Inc. (BLK). The deal will see Coinbase exchanges connecting with Aladdin, BlackRock's investment technology platform serving institutional clients, to provide direct access to cryptocurrency trading, beginning with Bitcoin. The deal with one of the world's largest asset managers helped to validate Coinbase's status as a leader in the crypto space. The top ten contributors to BUZZ Index performance gained an average of 39%, contributing over 41% of the Index's gains during the Period.
| Top BUZZ Index Contributors: July 14, 2022 - August 11, 2022 | |||
| Company | Ticker | Average Weight (%) | Return Contribution (%) |
| AMC Entertainment Holdings Inc | AMC | 3.29 | 2.06 |
| Coinbase Global Inc | COIN | 3.29 | 1.27 |
| Affirm Holdings Inc | AFRM | 1.22 | 0.88 |
| Amazon.com Inc | AMZN | 3.12 | 0.83 |
| Netflix Inc | NFLX | 2.16 | 0.75 |
| Advanced Micro Devices Inc | AMD | 3.04 | 0.69 |
| Tesla Inc | TSLA | 3.16 | 0.65 |
| Robinhood Markets Inc | HOOD | 2.70 | 0.65 |
| Ford Motor Co | F | 1.79 | 0.65 |
| Twitter Inc | TWTR | 2.99 | 0.63 |
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 detractor to performance during the Period was Lucid Group Inc. (LCID), the upstart maker of luxury electric vehicles, which announced a highly publicized Qualifying Transaction with Michael Klein's Churchill Capital IV SPAC in Q1 2021. Lucid has consistently failed to meet its production targets. During its Q2 2022 earnings release, the company once again cited "extraordinary challenges in the supply chain and logistics" as the reason for lowering its 2022 production guidance to 6,000 - 7,000 vehicles, down from the original guidance of 20,000 vehicles it initially targeted for the year. Outside of Lucid, the top detractors to performance featured large-cap stocks from the Communication Services, Information Technology, and Healthcare sectors, with two of the ten top detractors to performance for the period generating small positive returns, a telling sign of the strength within the cohort of BUZZ Index holdings during the Period.
| Bottom BUZZ Index Contributors: July 14, 2022 - August 11, 2022 | |||
| Company | Ticker | Average Weight (%) | Return Contribution (%) |
| Lucid Group Inc | LCID | 1.75 | -0.15 |
| AT&T Inc | T | 0.76 | -0.10 |
| Verizon Communications Inc | VZ | 0.48 | -0.06 |
| Pfizer Inc | PFE | 1.10 | -0.06 |
| Intel Corp | INTC | 0.90 | -0.05 |
| QUALCOMM Inc | QCOM | 0.46 | -0.04 |
| Roku Inc | ROKU | 0.78 | -0.02 |
| Visa Inc | V | 0.38 | -0.01 |
| FedEx Corp | FDX | 0.51 | 0.01 |
| United Airlines Holdings Inc | UAL | 0.37 | 0.02 |
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 - BlackRock Inc.
Much like traditional equities, the cryptocurrency markets have been steadily declining since the beginning of the year. Crypto-related stocks such as Coinbase and MicroStrategy (MSTR) were down 80% and 65%, respectively, before bouncing last month. Despite the downturn, the industry has continued to evolve. This month, asset management giant BlackRock announced that it would partner with Coinbase to provide crypto investment products to BlackRock's institutional clients. The crypto ecosystem demonstrates resiliency, drawing increasing institutional interest despite its volatile cycles. In response to growing institutional demand, BlackRock launched a Bitcoin private trust which will allow US institutional investors to gain passive exposure to Bitcoin, a move viewed by many as providing further legitimacy to crypto assets. Investors cheered the recent news with positive sentiment trending higher as some view the announcements as a potential boost for BlackRock's business. This month positive investor sentiment on BLK spiked, pushing the stock back into the BUZZ Index for the first time since March 2022, with a 1.37% weight.
BlackRock Inc. Stock Price | January 1, 2020 - August 11, 2022
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 August 2022 Rebalance Highlights
Streaming Platform Stocks
After a difficult first half of the year, technology stocks finally managed to stage a meaningful bounce last month. Positive investor sentiment has also been increasing, with some of the largest sentiment gains being observed in some of the hardest-hit stocks, particularly in the streaming platform sector. Streaming giant Netflix (NFLX) began the year with two massive earnings misses, each sending the stock down over 25% the following day. Netflix also reported its first-ever decline in subscribers, prompting many to question if the company's growth had peaked. Amidst a tough economic backdrop, Netflix has continued to lose subscribers, albeit at a slower than expected pace. While it may be too early to tell whether subscriber growth will re-emerge once economic conditions improve, investors appear hopeful, as sentiment has been climbing in recent weeks. One of NFLX's largest competitors, Roku (ROKU), is facing a similar situation. ROKU is down a whopping 85% from its 2021 highs as ad revenue has slowed during the economic downturn. While the stock remains near its lows, positive investor sentiment has also been climbing over the past month, as some may be taking the view that the worst may be behind the company. This month, NFLX jumps from a 1.93% weight to a maximum 3%, and ROKU climbs from a 0.87% weight to 1.7%.
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