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  • Thematic Investing

    Thematic and 'Meme' Classified Stocks Gain Despite Technology Stocks Continued Underperformance

    VanEck
    June 18, 2021
     

    Amidst a continued rotation from growth to value, the dispersion of equity returns across market sectors widened during the month as inflation concerns accelerated following the release of April readings of the Consumer Price Index (“CPI”) and the Producer Price Index (“PPI”), which reported year-over-year gains of 4.2% and 6.2% respectively. The latest readings represented the largest increases for the benchmark inflation gauges since 2008 (CPI) and 2010 (PPI). Despite some investor concerns relating to the negative effects of rising inflation on equity valuations, the minutes from the April meeting of the U.S. Federal Reserve (the “Fed”) showed that most committee members remain of the view that recent inflationary readings are ‘transitory’ and changes to monetary policy will be gradual. Within this context, the benchmark S&P 500 Index gained 0.7% during May while the Nasdaq Composite Index fell 1.5%.

    Health Care and Thematic-Related Stocks Drive Index Performance

    The continued rotation away from growth-oriented stocks to value-oriented stocks splintered as certain thematic stocks, including many denoted with ‘meme’ status, generated notable gains during the recent period between selection dates of the BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) (May 13th 2021 – June 10th 2021). The individual investor narrative has returned in full force. As vaccine rollouts accelerate across the globe and ongoing research studies continue to validate their efficacy rates, investors are once again rewarding health care companies most leveraged to the success of their vaccines, including Novavax and Moderna. Both companies were in the top-ten contributors to the latest returns of the Index. Other top contributors to performance included a range of stocks focused on the emerging themes of gambling, clean energy, and those of recent ‘meme’ fame. After several months of relative weakness, GameStop (NYSE: GME), Plug Power (NASD: PLUG), Palantir Technologies (NYSE PLTR), DraftKings (NASD: DKNG), and Rocket Cos (NYSE) all prominently contributed to recent gains within the BUZZ Index.

    Top Contributors: May 13, 2021 – June 10, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Novavax Inc NVAX 3.21 1.76
    GameStop Corp GME 3.74 1.06
    Plug Power Inc PLUG 2.91 1.04
    Palantir Technologies Inc PLTR 3.21 0.90
    DraftKings Inc DKNG 3.03 0.85
    Rocket Cos Inc RKT 2.88 0.68
    Moderna Inc MRNA 1.66 0.66
    Ford Motor Co F 2.02 0.57
    NVIDIA Corp NVDA 1.75 0.45
    Twitter Inc TWTR 2.48 0.42

    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.

    Over 85% of the BUZZ Index constituents posted positive returns during the period between selection dates for the May and June Index rebalance. The top detractors from performance provided little drag to overall returns. Communication services stocks were some of the top detractors from performance, with media giants AT&T (NYSE: T), Walt Disney (NYSE: DIS), and Netflix (NASD: NFLX) amongst the biggest performance laggards within the BUZZ Index in the period following the May 2021 Index rebalance.

    Bottom Contributors: May 13, 2021 – June 10, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    AT&T Inc T 0.85 -0.11
    Discovery Inc DISCA 0.18 -0.08
    Walt Disney Co/The DIS 1.54 -0.05
    Netflix Inc NFLX 1.70 -0.03
    Johnson & Johnson JNJ 0.97 -0.02
    Etsy Inc ETSY 0.42 -0.02
    CVS Health Corp CVS 0.35 -0.02
    Home Depot Inc/The HD 0.31 -0.01
    Wells Fargo & Co WFC 0.58 -0.01
    Freeport-McMoRan Inc FCX 0.38 -0.01

    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 Sector Highlight: Health Care

    Since the onslaught of the COVID-19 pandemic, pharmaceutical companies have rushed to develop vaccines to help control the spread of the virus. Many companies developed, tested, and succeeded in clinical trials as regulators pushed to fast track the process and provide the public with safe and effective vaccination options. U.S. listed healthcare companies involved in the race for the vaccine included conglomerate healthcare giants Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) together, with smaller and niche biotechnology companies including Moderna (NASD: MRNA) and Novavax (NASD: NVAX). Looking back to January 2020, before the start of the pandemic, both PFE and JNJ were featured in the BUZZ Index, each averaging less than a one percent weight within the Index. Positive pre-pandemic sentiment was likely driven by value-oriented investors who viewed the companies through a quality lens.

    Vaccine Developers – BUZZ Index Weight: January 1, 2020 - June 10, 2021

    Vaccine Developers - BUZZ Index Weight: January 1, 2020 - June 10, 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.

    BUZZ Index June 2021 Rebalance Highlights

    Biogen Inc.
    Biogen (NASDAQ: BIIB) is in the news this month because of significant developments in its latest Alzheimer’s drug. With the world focused on COVID-19, vaccine-related stocks such as Pfizer (NYSE: PFE), Moderna (NASDAQ: MRNA), and Novavax (NASDAQ: NVAX), have mostly dominated online conversation in the health care sector. However, on June 7th, The FDA gave accelerated approval to Biogen’s Alzheimer’s drug, Aduhelm, in what turned out to be a controversial decision. Many neurologists and statisticians reviewing the drug’s data have expressed skepticism over its efficacy, including 10 out of the 11 members on the FDAs independent committee, three of which later resigned following the FDA’s decision. The approval came as a surprise to many in the industry, and the market, as BIIB stock surged 60% on the news. BIIB had been range bound, trading between $225 and $375 per share for almost five years; news of the Aduhelm approval propelled the stock through its previous resistance levels to new all-time highs. Sentiment also increased significantly with the announcement as investors are collectively of the view that the stock may be preparing for a continued move higher. This month BIIB enters the BUZZ Index at a 2.02% weight.

    Chipotle Mexican Grill Inc.
    It has been almost a year since the BUZZ Index featured a notable restaurant stock within its monthly reconstitution. Chipotle Mexican Grill (NYSE: CMG), is one of the industry’s most well-known growth stocks, posting an impressive run over the past 15 years. After a 700% stock price increase between 2009 and 2015, the company was hit hard by a series of E. coli outbreaks that threw the company into ‘damage control’ mode and put pressure on its stock for almost two years. CMG first entered the BUZZ Index in May 2017 as the crisis began to wane and we noted at the time that increasing investor sentiment may be indicating renewed confidence in the stock. CMG would go on to double in value through March 2020, until the onset of the COVID-19 pandemic sent the stock down 50%. Like many other growth-oriented stocks, CMG came roaring back with the help of unprecedented government stimulus, increasing over 250% in following six months. CMG has been out of the Index since last July, and shares have changed little since then. The effects of the vaccine rollout across the United States have recently begun to materialize, as many parts of the country have started to resume some normality. With the summer season approaching and restaurants reopening, investor sentiment toward consumer discretionary stocks has been on the rise; CMG re-enters the BUZZ Index this month with a 1.31% weight.

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

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