‘Buzz’ ETF tracking social media sentiment launches Thursday amid Reddit manias in stocks

by

The logos of Google, Facebook, Instagram, Twitter, Snapchat and TikTok displayed on a computer screen.

Denis Charlet | AFP via Getty Images

Is it time for an ETF that measures hype?

Measuring the buzz around stocks mentioned in social media is all the rage.  Now there’s an exchange-traded fund for that.

The Van Eck Vectors Social Sentiment ETF (BUZZ) selects 75 stocks with the most bullish social media sentiment and packages them into an ETF.  

This is essentially a momentum index, but instead of tracking stocks that are moving on price, BUZZ tracks stocks that are getting a lot of social media hype.

The ETF is based on the Buzz NextGen AI U.S. Sentiment Leaders Index. What goes in the index is based on an initial list of stocks that meet two criteria: a $5 billion minimum market capitalization, and that are getting consistent and diverse mentions on social media over the past year. There are 250-350 stocks that meet that initial criteria, then each month they are ranked from highest sentiment to lowest, with the top 75 going in the index.

Not a Reddit meme stock ETF

If you’re looking for something that captures Reddit sentiment around small stocks like GameStop, you might be disappointed.

“This is not a Reddit meme stock ETF,” Jamie Wise, CEO of Buzz Holdings and the originator of the index, tells me. “This is about the broader conversation around stocks mentioned on social media platforms.  We are using broad social media sources, principally Twitter and StockTwits.”  Wise say they also use Yahoo Finance, Benzinga, and Reddit as well.

How to determine “social media buzz?” Wise says the index uses natural language algorithms that examines whether the comment is positive, negative or neutral, then ranks each stock based on the degree of positive sentiment and breadth of discussion. That’s key to understanding the index: stocks are weighted by sentiment, not market capitalization, and no one stock can exceed 3% of the index. It is rebalanced every month. 

“We are aggregating the collective sentiment of the community” that comments on stocks on social media, Wise told me.

Initially, the largest holdings include Twitter, DraftKings, Ford, American Airlines, and Facebook. Tesla is number 10. The $5 billion minimum market cap criteria would exclude Reddit names like Gamestop, Express, or AMC Entertainment from the mix.

Wise says the stocks in the index are proof they are not chasing the latest Reddit craze: “These are not the kind of stocks that are being promoted by celebrities. These are everyday stocks being promoted by people with a wide variety of viewpoints, and is not focused on a narrow group of Reddit names.”

Is social media popularity a good way to pick stocks?

Can stocks be manipulated on social media?

Chat rooms are full of investors with many different motives, including some likely trying to manipulate stocks. 

Wise says the index’s focus on stocks with a market capitalization of more than $5 billion helps reduce the chances that stocks in the index could be manipulated. “The market cap size and volume of discussions taking place around these companies makes them difficult targets for manipulation by any bad actors,” states a FAQ sheeted provided by Van Eck states.

Portnoy buys in