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    BUZZ Investing: Are Healthcare Stocks What the Doctor Ordered?

    VanEck
    August 20, 2021
     

    The rapid spread of the COVID-19 Delta variant resulted in a significant spike in domestic infection rates as an increasing number of hot-spots across the southern United States emerged, reflective of those populations that tend to have vaccination rates below the national average. Inflation concerns, which had dominated the economic discussion through much of the year, were confirmed as broad measures of inflation at the consumer and producer levels rose to their highest rates in over a decade.

    However, strong corporate profits and a robust labor market have offset inflation concerns, as nearly all S&P 500 companies that reported second quarter earnings beat expectations1, while the number of new jobs added in June produced the largest monthly gain since August 20202. Domestic equities set fresh record highs while treasuries continued to rally, framing the narrative within the overall macro environment.

    Health Care Stocks Pace Advancing Stocks Within the BUZZ Index

    Shares of healthcare stocks were the leading positive contributors of stocks that advanced within the recent period between selection dates of the BUZZ NextGen AI US Sentiment Leaders Index (BUZZ Index). The rising spread of the COVID-19 Delta variant focused investor attention on the sector amidst discussions of additional booster requirements, which may be required to slow the effects of the variant’s spread. Online gambling industry leader DraftKings (NYSE: DKNG) reported strong revenue growth for the second quarter, easily surpassing analyst estimates as its customers continued placing wagers on spring and summer sporting events including the Masters, the NBA playoffs, Wimbledon, and a host of UFC fights. The stock moved sharply higher as the quarter proved that the reopening of restaurants, movie theaters and other entertainment venues would not impact demand for the company’s mobile product offerings. MicroStrategy Incorporated (NASD: MSTR) was another notable positive contributor to performance within the BUZZ Index. Recall, MSTR was the first cryptocurrency-focused stock to be featured within the BUZZ Index, as it was added to the constituent holdings during the July 2021 monthly reconstitution at a 1.03% weight. The timing proved prescient, as MSTR benefitted from a rally in Bitcoin leading to a notable gain for the stock during the recent period between selection dates of the BUZZ Index.

    Top Contributors: July 8, 2021 – August 12, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Novavax Inc NVAX 2.46 0.76
    Moderna Inc MRNA 1.31 0.66
    Advanced Micro Devices Inc AMD 3.41 0.57
    Cleveland-Cliffs Inc CLF 2.37 0.52
    Draftkings Inc DKNG 2.86 0.51
    Microstrategy Inc MSTR 0.82 0.34
    Tesla Inc TSLA 3.21 0.32
    Palantir Technologies Inc PLTR 2.92 0.26
    Snap Inc SNAP 1.03 0.21
    Airbnb Inc ABNB 1.02 0.16

    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.

    About half of the BUZZ Index constituents posted positive returns during the period between selection dates of the July and August Index rebalance. The top detractors from performance featured many well-known stocks followed by the individual investor community, including several favorites from the Reddit community, notably GameStop (NYSE: GME) and Rocket Cos (NYSE: RKT). Virgin Galactic (NYSE: SPCE), which was the leading contributor to gains during the period between the June and July selection dates of the BUZZ Index, reversed course, pacing detractors to performance in the recent period. In what proved to be a classic ‘buy the rumor, sell the news’ scenario, shares of SPCE fell back to earth following the successful rocket-powered flight of its SpaceShipTwo Unity on July 11th. The “Unity 22” mission was a technological success as it delivered a full crew of two pilots and four mission specialists, including the company’s Founder, Sir Richard Branson to the edge of space. Despite the engineering success of the mission, which drew widespread acclaim and global news coverage, investors aggressively sold the stock, crashing its price in the period following the launch, until the BUZZ Index’s recent selection date. Despite the pullback, investor sentiment remains overwhelmingly positive, with the stock remaining featured at a max 3% holding during the scheduled August rebalance.

    Bottom Contributors: July 8, 2021 – August 12, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Virgin Galactic Holdings Inc SPCE 2.22 -2.12
    GameStop Corp GME 2.64 -0.40
    Amazon.com Inc AMZN 2.98 -0.37
    Nikola Corp NKLA 0.74 -0.28
    Plug Power Inc PLUG 2.22 -0.25
    Rocket Cos Inc RKT 1.65 -0.25
    Roku Inc ROKU 1.86 -0.21
    Biogen Inc BIIB 0.88 -0.19
    Las Vegas Sands Corp LVS 0.68 -0.15
    Beyond Meat Inc BYND 0.80 -0.15

    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: Uber Technologies Inc.

    Uber Technologies Inc. (NYSE: UBER, “Uber”) has endured its share of turbulence following the company’s initial public offering in May 2019. The heralded company achieved celebrity status during its time as a private company, pioneering the ride-sharing segment and securing a leading position in the market as competitors emerged within the ecosystem. Uber is synonymous with the ride-sharing economy, which increasingly is taking precedence with millennials over direct vehicle ownership. Prior to its public market life, Uber experienced strain within its executive team, with founder Travis Kalanick ousted as CEO in 2017 after a series of scandals, including allegations that he allowed a toxic workplace of sexual harassment and discrimination to develop. Kalanick remained on the company’s board until December 2019, when he sold over 90% of his stake in the company and resigned.

    During its public life, Uber faced investor concerns relating to its profitability and growth prospects. Under the leadership of current CEO Dara Khosrowshahi, Uber advanced other projects as it looked to grow and diversify from its ride-hailing roots, adding business lines including Uber Eats and autonomous vehicles. Shares of Uber traded mostly lower following its IPO as valuation and growth concerns continued to weigh on investors. It was not until January 2020 that Uber was first featured in the BUZZ Index, reflecting increasing positive investor sentiment which largely formed a consensus ‘value’ view after Uber had lost approximately one-third of its market capitalization following its IPO. By February 2020, positive investor sentiment was high enough for the company to receive a full three percent max weight within the Index. The timing proved ill-fated, as the onset of the COVID-19 pandemic weighed heavily on Uber’s core ride-hailing business and the stock fell by more than fifty percent.

    Uber failed to qualify for Index inclusion in the subsequent two rebalances; however, strength in the company’s Uber Eats division (a segment that greatly benefitted from pandemic related lockdowns) reignited positive sentiment toward the stock. Uber re-entered the BUZZ Index during the May 2020 rebalance and was featured within its holdings consistently until the July 2021 rebalance during which time the stock experienced a notable market share increase. Uber once again did not qualify for inclusion during the July 2021 rebalance as sentiment waned first on weaker than expected earnings, and then fell further amidst the resurgence in the delta variant. Investors may once again be seeing ‘value’ in shares of Uber as it re-enters the BUZZ Index during the August rebalance after share prices declined during its time out of the Index. Uber re-enters the BUZZ Index at just a 0.71% weight.

    Uber Technologies Inc. (UBER) Stock Price: May 13, 2019 - August 12, 2021

    Uber Technologies Inc. (UBER) Stock Price: May 13, 2019 - August 12, 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.

    Index August 2021 Rebalance Highlights

    Healthcare Sector
    It was only a matter of time before the healthcare stocks began to gain momentum once again. With the widespread rollout of vaccines by various biotech companies, it was expected that the major pharmaceutical stocks would benefit significantly. Companies such as Moderna (NASDAQ: MRNA) and Pfizer (NYSE: PFE), which have already been rallying over the past year, have experienced near parabolic gains over the past two months as the financial impact from the sale of vaccines materialized far above analyst estimates. The focus for investors now shifts to the sustainability of revenues from the vaccines going forward. Pfizer has already announced it expects to recommend a third booster shot later this year while increasing case numbers of virus variants will likely keep the demand for additional vaccines high. Positive investor sentiment has increased along with the companies share prices. This month, MRNA increased from a 0.85% weight to a max 3% weight and PFE increased from 0.47% to 1.96%. The overall weight of healthcare sector stocks in the BUZZ Index increases from 5.7% to 9.8%, pointing to accelerating investor confidence in the sector.

    Plug Power Inc.

    Last year, Plug Power (NASDAQ: PLUG) was one of the hottest stocks in the technology sector, rising an astronomical 20-fold amid the frenzy in renewable energy stocks. Since the rotation out of growth stocks which began in February this year, PLUG has been mired in a slump with its stock falling over 70% from all-time highs of $70 per share. A brief bounce in May provided some relief for the bulls; however, momentum has slowed once again. Positive investor sentiment remains elevated enough to warrant inclusion within the BUZZ Index, yet it has been declining amid the prolonged sell-off. PLUG, once a max 3% weight in the Index, dropped to 1.29% this month, its lowest weight since entering the Index. Time will tell whether the declining sentiment stabilizes and enters a period of consolidation, or accelerates further, potentially leading to PLUG being excluded from the BUZZ Index and another wave lower for its share price.

    For more on the rebalance results, view the Index reconstitution report.

    Important Disclosures

    1 Source: https://insight.factset.com/sp-500-earnings-season-update-august-6-2021

    2 Source: https://www.cnn.com/2021/07/02/economy/june-jobs-report/index.html

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