From Twitter to Your Portfolio: Unlock the Power of Social Media
March 03, 2021
Read Time 3 MIN
Millions of people use social media and other online platforms to express opinions and share ideas—including those related to their stock portfolio. The vast amount of content generated across these platforms contains valuable insights that can help investors gain a potential edge over the broader market.
Gaining an Edge from Social Media
Social media platforms have exploded, since first appearing in the early 2000s. In the U.S., about 80% of the population now use these platforms, up from 10% in 20081. From its start as a place to stay in touch with family and post cute baby animal pictures, social media has transformed into a real-time news outlet, often times breaking news before traditional media. Beyond just a news source, people are increasingly using them as online-communities to share opinions about stocks and other financial topics. The introduction and adoption of stock cashtags ($+ticker) as well as the creation of dedicated investment platforms, like Stocktwits, and dozens of others have helped solidify this movement and fuel the growth of investment-related online discussions. The millions of interactions across these platforms have created a rich and valuable dataset that gives insight into the potential of different stocks. This underpins a social media investing strategy that is powered by investor sentiment.
Social Insights Have Led to Outperformance vs. the S&P 500
8/18/2016 – 1/31/2021
Source: Factset, Data as of 1/31/2021. Performance data quoted represents past performance. Past performance is not a guarantee of future results. Index performance is not illustrative of fund performance. Prior to 3/02/2021, VanEck Vectors Social Sentiment ETF had no operating history. For fund performance current to the most recent month-end, visit vaneck.com.
A Strategy Powered by the People
Proponents of behavioral finance have long known that investor sentiment and emotions can have an impact on the price and performance of stocks. In today’s world, with the current state of technology and mass social media adoption, it is possible to measure social sentiment by the millions. Instead of relying on a smart friend or favorite TV pundit, one can assess millions of diverse opinions to ascertain the mood of investors—potentially even before the market as a whole realizes it. This is one reason why professional money managers have sought to gain an informational edge through market sentiment indicators, driven by social media analytics.
The BUZZ NextGen AI US Sentiment Leaders Index employs leading edge analytics to harness the collective conviction of millions of investors. The Index tracks the performance of the 75 large cap U.S. stocks that exhibit the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources, including social media, news articles, blog posts and other alternative datasets. Millions of investment related messages and posts on sites like Reddit, Stockstwits, Twitter, and others are analyzed to identify stocks with the highest future return potential. The index is dynamic and keeps the portfolio of stocks current by reviewing picks each month, dropping stocks that have declined in investor sentiment and adding others where sentiment has increased. The Index ensures quality of picks and strength of conviction by targeting only large cap stocks with seasoned message history and consistent, diverse and broad conversation.
Source: Buzz Holdings
With the launch of the VanEck Vectors® Social Sentiment ETF (BUZZ), all investors can incorporate social sentiment analytics into their portfolios, to gain an informational edge. BUZZ seeks to track as closely as possible, before fees and expenses, the price and yield performance of the BUZZ NextGen AI US Sentiment Leaders Index.
1 Source: Edison Research; Triton Digital. March 2020
An investment in the VanEck Vectors Social Sentiment ETF (BUZZ) may be subject to risks which include, among others, risks related to social media analytics, investing in equity securities, medium-capitalization companies, information technology, communication services, consumer discretionary, health care and industrials sectors, market, operational, high portfolio turnover, index tracking, authorized participant concentration, new fund, absence of prior active market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and concentration risks which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks.
Investing in companies based on social media analytics involves the potential risk of market manipulation because social media posts may be made with an intent to inflate, or otherwise manipulate, the public perception of a company stock or other investment. Although the Sentiment Leaders Index provider attempts to mitigate the potential risk of such manipulation by employing screens to identify posts which may be computer generated or deceptive and by employing market capitalization and trading volume criteria to remove companies which may be more likely targets for such manipulation, there is no guarantee that the Sentiment Leaders Index's model will successfully reduce such risk. Furthermore, text and sentiment analysis of social media postings may prove inaccurate in predicting a company's stock performance.
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Effective August 18, 2016, BUZZ Indexes Inc. implemented changes to the BUZZ NextGen AI US Sentiment Leaders Index construction rules. The index constituent count was increased from 25 to 75 stocks and the maximum constituent weight was reduce from 15% to 3%. These change may result in more a diversified exposure to index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.
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September 21, 2022
September 21, 2022
As the global energy crisis unfolds governments who previously opposed nuclear energy are forced to adopt it. Cameco Corporation (CCJ), one of the largest uranium miners, entered the BUZZ Index.
September 20, 2022
The semiconductor industry remains on constant watch. Although new risks have emerged, long–term opportunities remain as chips are crucial components for innovation.
August 19, 2022
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.
July 22, 2022
Meme-stocks prove to be surprisingly resilient to the recent downward move in equities; EV manufacturer Rivian Automotive Inc (RIVN) joins Tesla (TSLA) and Lucid (LCID) in the Buzz Index.
June 17, 2022
Consumer discretionary and technology stocks rebounded in May. Chevron and Southwestern Energy joined the Buzz Index; Macy’s re-entered the Index.