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  • Thematic Investing

    BUZZ Investing: Virgin Galactic Takes Off

    VanEck
    July 16, 2021
     

    Falling U.S. ten-year yields supported the rally of growth over value within U.S. equity markets1, fueling gains in U.S. domestic equities. During the period between selection dates for the June and July Index rebalance (June 10th 2021 – July 8th 2021), the BUZZ NextGen AI US Sentiment Leaders Index (the “Index”) gained 1.6% while the S&P 500 Index gained 2.0% and the Nasdaq Composite Index gained 3.9%. The benchmark U.S. ten-year note fell 14 basis points (“bps”) during the period, extending its recent decline to yield 1.29%. The market appears to be succumbing to the U.S. Federal Reserve’s view that inflation is ‘transitory’ in nature, despite official guidance from the median FOMC Committee participant that highlighted a shift in expectations of two rate hikes ‘sometime’ in 2023, up from no rate hikes just three months ago.

    Virgin Galactic Rockets Higher

    Virgin Galactic (NYSE: SPCE) was the leading contributor to gains in the Index during the recent period between selection dates. SPCE re-entered the index during the scheduled June rebalance, promptly to ‘take off’ as the company announced on July 1st that the flight window for the next rocket-powered test flight of its SpaceShipTwo Unity would open on July 11th. The “Unity 22” mission marks the Company’s fourth crewed spaceflight and the first to carry a full crew of two pilots and four mission specialists in the cabin, including the Company’s founder, Sir Richard Branson. SPCE rocketed higher by 49% during the period between Index selection dates, as anticipation for the launch event grew and Branson appeared poised to beat rival billionaire, Jeff Bezos. Bezos is slated to be aboard Blue Origin’s New Shepard flight scheduled for July 20th, a date that marks the 52nd anniversary of the Apollo 11 moon landing. Four of the top ten contributors to the Index’s performance were from the Information Technology sector, including, Apple Inc (NASD: AAPL), NVIDIA Corp (NASD: NVDA), Advanced Micro Devices Inc (NASD: AMD), and Shopify Inc (NYSE: SHOP).

    Top Contributors: June 10, 2021 – July 8, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Virgin Galactic Holdings Inc SPCE 2.39 1.41
    Apple Inc AAPL 2.99 0.38
    NVIDIA Corp NVDA 2.88 0.37
    Amazon.com Inc AMZN 2.95 0.33
    Advanced Micro Devices Inc AMD 3.09 0.29
    Roku Inc ROKU 1.41 0.27
    Peloton Interactive Inc PTON 1.91 0.24
    Twitter Inc TWTR 2.35 0.23
    Tesla Inc TSLA 3.03 0.21
    Shopify Inc SHOP 0.94 0.19

    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.

    Only 45% of the Index constituents posted positive returns during the period between selection dates for the June and July Index rebalance. The top detractors from performance in the Index were widespread with no stocks contributing disproportionately to overall returns. Four of the ten leading detractors from performance came from the Consumer Discretionary sector. Those stocks represented a range of industries including pharmaceutical company Novavax (NASD: NVAX), online gambling site DraftKings (NASD: DKNG), cruise line Carnival (NYSE: CCL), and auto manufacturer Ford (NYSE: F). Stock from the Industrials, Materials, Financials and Health Care sectors also featured in the top detractors to performance within the Index in the period following the June 2021 Index rebalance.

    Bottom Contributors: June 10, 2021 – July 8, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Novavax Inc NVAX 2.8 -0.43
    GameStop Corp GME 3.02 -0.43
    DraftKings Inc DKNG 2.46 -0.32
    Rocket Cos Inc RKT 2.89 -0.22
    Carnival Corp CCL 0.77 -0.18
    Ford Motor Co F 2.59 -0.18
    United States Steel Corp X 0.79 -0.16
    Plug Power Inc PLUG 2.56 -0.15
    Delta Air Lines Inc DAL 1.07 -0.14
    Barrick Gold Corp GOLD 1.08 -0.13

    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: ContextLogic Inc.

    ContextLogic Inc. (NASD: WISH), doing business as Wish.com, provides e-commerce services. WISH helps merchants reach customers, as well as enables users to personalize shopping experiences to find relevant products. Many view the company as a lower value blend of Amazon.com (NASD: AMZN) and ETSY (NASD: ETSY). WISH is essentially a digital marketplace for cheap, unbranded goods sourced directly from Chinese warehouses. The products featured on the platform are often viewed as knockoffs with questionable quality. Moreover, the WISH marketplace is viewed as lacking strong customer support service. Despite the prevailing views of the platform, WISH completed its IPO on December 15, 2020, in an offering that valued the company at approximately $14 billion. At the time of the company’s IPO, WISH boasted a monthly active user base (MAUs) of more than 100 million people.

    Following its IPO, shares of WISH slumped as some called into question declines in the company’s MAUs and growth prospects. Short interest in the company’s shares grew as the stock fell below US$8 per share, down over 75% from its peak at the end of January 2021. The combination of high short interest, together with a depressed valuation, caught the attention of the Reddit r/WallStreetBets community which viewed the situation as echoing the GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) dynamics of January of 2021. Online discussion surrounding the company grew, and by June 2021, WISH was positioned by many online participants as the next ‘meme-stock’ opportunity. Conversation exploded across various online platforms and trading activity in the company’s stock followed suit, with shares of WISH nearly doubling over the final three weeks of June. While the market capitalization of WISH exceeded the Index threshold of US$5B for much of its life as a public company, it was not until the online conversation, seasoned in a diverse and sustained manner, that it qualified for inclusion within the Index’s latest quarterly eligible universe which was determined on July 1st, 2021. While shares of WISH have since consolidated, and its market capitalization has fallen back to $6 billion, investor sentiment across online platforms has remained decidedly positive, resulting in WISH making its debut within the Index during the July 2021 regular rebalance at a maximum 3% weight.

    Context Logic Inc. (WISH) Stock Price: December 15, 2020 - July 8, 2021

    Context Logic Inc. (WISH) Stock Price: December 15, 2020 - July 8, 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 July 2021 Rebalance Highlights

    AMC Entertainment Holdings, Inc.

    This year, AMC Entertainment (NYSE: AMC) closely rivaled the hype surrounding GameStop (NYSE: GME) as both proved to be the ‘poster-children’ of the 2021 meme-stock storyline. At the peak of the meme stock frenzy in January 2021, many people across the Reddit platform who had missed the GME short squeeze trade began looking for the next stock that could potentially be squeezed higher. AMC, given its similarities to GameStop as a beaten-up, heavily shorted value stock, began trending on the Wallstreetbets subreddit and quickly gained momentum. AMC rallied from $2.50 to as high as $20 in January, before pulling back for several months along with other highly followed meme stocks. In May, amid a resurgence of interest, AMC took the lead from GME, captivating the attention of social media communities, leading to a surge in its value by over five-fold in just two weeks amidst surging sentiment and record-breaking trading volume. Since then, as the stock has been consolidating, both the amount of online conversation and level of positive investor sentiment has remained at all-time highs, suggesting the stock may be poised for another move higher. This month AMC makes its debut in the Index, featured as a top sentiment name with a max 3% weight.

    MicroStrategy Incorporated

    Entering the Index for the first time, MicroStrategy (NASDAQ: MSTR) is the first cryptocurrency-focused stock to be featured in the Index. After trading below US$5,000 during the onset of the COVID-19 pandemic, the price of bitcoin surged to over $60,000 in April 2021 before pulling back by almost 50%. While many traditional market prognosticators regarded crypto currencies as a bubble, over the past year, the narrative has shifted as many publicly traded companies have been actively investing in the cryptocurrency and blockchain space. Companies such as Square (NYSE: SQ), PayPal (NASDAQ: PYPL), and Visa (NYSE: V) have integrated crypto currencies as methods of payment, while others such as Overstock (NASDAQ: OSTK) and Riot (NASDAQ: RIOT) have shifted their core strategy to investing in blockchain companies. Further adoption has come from companies such as MSTR and Tesla (NASDAQ: TSLA), which have allocated excess corporate cash reserves directly to bitcoin. MSTR, once a software business, has been by far the most aggressive as CEO Michael Saylor has effectively shifted the company’s strategy to holding bitcoin as a long-term investment, even closing new debt and equity offerings to raise cash for additional investment in the cryptocurrency. Investor sentiment has been elevated on MSTR, even as bitcoin pulled back from its recent highs. This month MSTR enters the Index with a 1.03% weight.

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

    Important Disclosures

    1 As measured by the Russell 1000 Growth Index and the Russell 1000 Value Index.

    Definitions: The S&P 500 is a stock market index of 500 of the largest companies listed on stock exchanges in the United States. The Nasdaq Composite Index is a stock market index that consists of the stocks that are listed on the Nasdaq stock exchange. The Russell 1000 Growth Index measures the performance of the large- cap growth segment of the US equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected and historical growth rates.

    This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of 3rd party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

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