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BUZZ Investing: Sentiment Toward Energy on the Rise

June 17, 2022

Read Time 7 MIN

Consumer discretionary and technology stocks rebounded in May. Chevron and Southwestern Energy joined the Buzz Index; Macy’s re-entered the Index.

Global equities were modestly higher during the recent period between selection dates (May 12, 2022 to June, 9, 2022) of the BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”), however, the headline returns masked significant levels of intra-month volatility as investors debated the economic impact of additional interest rate increases and prospects of a domestic recession. The BUZZ Index gained 5% during the period between selection dates. The S&P 500 Index experienced daily gains or losses of more than 1% on ten of twenty-one trading days with five of those ten days experiencing gains or losses of more than 2%. The S&P 500 Index had fallen into bear market territory on an intra-day basis on May 19, falling nearly 21% from its all-time high of early January 2022, before recovering losses and staging a late-month rally to finish the session in the positive. The technology heavy Nasdaq Composite Index finished positive for the same selection date period by 3.37%, yet remained down 25% year-to-date. The year-to-date loss for the S&P 500 marks the index’s worst start to a calendar year since 1939, while the year-to-date decline for the Nasdaq Composite marks its worst start to a new year since the index was created in 1971.1

The BUZZ Index declined 2.36% during the month of May compared to the S&P 500 Index, which returned 0.18% during the same period. Year to date, the BUZZ Index trails the S&P 500 with returns of -35.71% and -12.76%, respectively, as of the end of May.

Beaten up Consumer Discretionary and Technology Rebound

Technology, growth-oriented and thematic related equities have been among the hardest hit during the recent correction across U.S. markets. The top contributors to BUZZ Index performance during the recent period between selection dates feature an assortment of stocks from those segments. GameStop Corp (GME), once at the center of the ‘reddit’ craze and the original branded ‘meme-stock’, led all advancers in the BUZZ Index during the recent period as its shares surged 44%, contributing 1.25 percentage points of the BUZZ Index’s 5% gain during the period. As can be seen in the following table, seven of the top ten contributors to BUZZ Index performance remain 50% or more below their 52-week high as of the June 9 selection date. The average trading price for the top ten contributors was 64% below their 52-week high, a telling sign of the extent of the sell-off of those segments of the market.

Top BUZZ Index Contributors: May 12, 2022 – June 9, 2022
Company Ticker Average
Weight (%)
Return
Contribution (%)
% Change from 52-week high
(as of June 9, 2022)
GameStop Corp GME 3.4 1.25 -50%
Upstart Holdings Inc UPST 0.31 0.58 -90%
DraftKings Inc DKNG 0.51 0.45 -79%
Advanced Micro Devices Inc AMD 3.3 0.45 -40%
Palantir Technologies Inc PLTR 2.96 0.41 -70%
Lucid Group Inc LCID 2.75 0.37 -67%
NVIDIA Corp NVDA 3.05 0.34 -48%
AMC Entertainment Holdings Inc AMC 2.98 0.30 -80%
Amazon.com Inc AMZN 2.91 0.25 -38%
SoFi Technologies Inc SOFI 3.47 0.22 -75%

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 information technology, communication services, industrials and consumer staples sectors. Social media platforms Snap Inc (SNAP) and Twitter Inc (TWTR) were the biggest detractors from performance during the recent period. Carvana (CVNA), the online used car shopping platform, which was featured in last month’s blog, continued to trade lower as slowing consumer demand weighed on the stock. CVNA also announced significant reduction in headcount as it tries to manage cash flow, signaling investor concerns related to its future solvency given its large debt load may be warranted. Shares of CVNA fell 38.1% during the period, yet detracted just 27 basis points from overall BUZZ Index performance given its low average weight in the Index of just 61 basis points during the period.

Bottom BUZZ Index Contributors: May 12, 2022 – June 9, 2022
Company Ticker Average Weight (%) Return Contribution (%)
Snap Inc SNAP 1.03 -0.68
Twitter Inc TWTR 2.61 -0.51
Carvana Co CVNA 0.61 -0.27
Robinhood Markets Inc HOOD 2.89 -0.26
Walmart Inc WMT 0.64 -0.22
Target Corp TGT 0.37 -0.19
Lyft Inc LYFT 0.59 -0.11
Meta Platforms Inc META 2.95 -0.11
Snowflake Inc SNOW 0.81 -0.07
Carnival Corp CCL 0.67 -0.07

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 – Walmart Inc.

Shares of Walmart (WMT) suffered their biggest one-day decline since the 1987 stock market crash, falling 11.4% on May 17 after reporting its fiscal first-quarter 2023 earnings. Despite reporting $141.6 billion in revenue, which beat analyst revenue estimates of $138.9 billion, surging costs weighed heavily on the company’s margins as it reported $1.30 per share in earnings, well below analyst estimates of $1.48. Walmart CEO Doug McMilon remarked when reviewing the results that "Bottom-line results were unexpected and reflect the unusual environment. U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected." Investors may have been further concerned that the company will be hesitant to raise prices to restore its profit margins as McMilon further noted that Walmart “will balance the needs of our customers for value with the need to deliver profit growth for our future."

Walmart has long been featured within the BUZZ Index. Since January 2021, WMT has averaged a 1.00% weight as a consistent constituent of the Index. WMT received a 1.42% weight within the Index during the March 2022 Index rebalance, and as the stock proceeded to trade higher in the ensuing months, nearly reaching $160 per share, sentiment began to wane. During the May 2022 Index reconstitution, WMT received just a 0.61% weight within the Index. The volume of discussion across online platforms spiked following the disappointing Q1 2023 earnings results in May, with investor sentiment increasingly positive as investors may view the sell-off in WMT shares as overdone and the stock representing a value opportunity. WMT received a weight of 2.02% during the June Index reconstitution.

Walmart Stock Price | January 4, 2021 – June 13, 2022

Walmart Stock Price | January 4, 2021 - June 13, 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 June 2022 Rebalance Highlights

Energy Sector

Two years ago, oil futures infamously traded into negative territory as the COVID-19 related lockdowns around the world quickly destroyed demand while shippers were unable to find storage for their production. Oil prices quickly rebounded as economies around the world re-opened, and like most risk assets, the price of crude steadily rose until the end of 2021. Unlike equities, which have been heading lower throughout 2022, the price of oil continued to surge higher, reaching levels not seen since the 2007 all-time highs. Supply-side issues, exacerbated by the conflict in Ukraine, have caused upward pressure on prices. Even with OPEC ramping up production, the increased output is unable to offset the effect of sanctions on Russia as many countries have agreed not to purchase Russian oil. Energy stocks have benefited, with oil and gas companies such as Chevron (CVX) reaching all-time highs. As we approach the first summer since most of the major economic lockdowns have been lifted, seasonal demand for crude is once again rising and investor sentiment toward energy stocks is rising alongside. This month, Chevron and Southwestern Energy (SWN) are new additions to the BUZZ Index, with weights of 0.91% and 0.51%, respectively.

Macy’s

North American consumers have increasingly returned to malls and stores over the past year. Inflationary pressures have sent the prices of basic goods and energy higher, eroding the purchasing power of consumers; however, demand for fashion remains surprisingly high. Although traffic at physical stores has improved, the COVID-19 pandemic has notably shifted consumer behaviors with online sales continuing to make up a significant portion of retailers' sales. Retailers such as Macy's (M) that have adapted to changing consumer trends and invested in their digital strategy have benefited. The company's comparable sales are up significantly year-over-year, with online sales now accounting for more than 30% of total revenues. Total active online customers have increased as well. Macy's high-end division, Bloomingdale's, is thriving, as affluent customers' shopping habits appear relatively unaffected by surging inflation. Macy's surprisingly strong business caught many investors by surprise, and the stock jumped 20% on last month's earnings. Investor sentiment has been increasing in recent weeks as well, and this month Macy’s re-enters the Index with a 0.82% 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.

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Important Disclosures

1 Source: Dow Jones Market Data.
Company data is the source for all particular company information quoted.

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