The poster child of the 2020-2021 stock market so far has been Dave Portnoy of Barstool sports. Portnoy transformed himself from a sports gambler who likes good pizza and crude jokes into Davey Day Trader, the scourge of the Wall Street suits.
His daily videos of him trading stocks often went viral. Portnoy had figured out that with the Fed pumping trillions into the market, most stocks would go up most of the time. Portnoy appeared to be taking massive risks and booking massive gains.
It was brilliant marketing, even if he was only risking a fraction of his net worth.
Now he's taking that social media clout one step further. Portnoy helped launch a brand-new ETF called the VanEck Vectors Social Sentiment ETF (NYSEArca: BUZZ).
In true Barstool fashion, the video announcing BUZZ was tacky, tasteless, and many think may be the final straw that forces index providers to register with SEC for the first time ever. But it was effective.
Before you rush off to add this ETF to your trading account, let's see if the juice is worth the squeeze...
What Is the BUZZ ETF?
BUZZ is going to track the BUZZ NextGen AI US Sentiment Leaders Index. This index tracks the social media mentions of stocks and selects the 85 stocks with the best "buzz" at any given point in time. They use artificial intelligence to track posts on Twitter, StockTwits, CNBC, and a host to other web sites to see which stocks everybody loves right now.
Right now, BUZZ owns what you might expect. Large positions include Tesla Inc. (NASDAQ: TSLA), DraftKings Inc. (NASDAQ: DKNG), Netflix Inc. (NASDAQ: NFLX), Facebook Inc. (NASDAQ: FB), and Amazon.com Inc. (NASDAQ: AMZN). Ford Motor Co. (NYSE: F) makes the cut as it has been talked up as a recovery stock and a potential player in the electric vehicle market.
The returns for the index have been outstanding, with an average annual return of almost 25% over the past five years. Over the last year, performance was also fantastic, tracking up gains of over 70%.
Keep in mind, that's paper trading. The ETF just started trading this month.
The combination of AI and a portfolio of hot stocks is enough to get people excited about the ETF, even outside of the Barstool universe.
But should you "Join the Swarm," as VanEck suggests, and add shares of BUZZ to your portfolio?
Here's how to play it...
How to Use the BUZZ ETF for the Biggest Gains
If you're bullish on stocks, then yes, you should buy as much BUZZ as you can stuff in your portfolio.
This is better than leveraged long ETFs every day of the week. If the market is moving higher, then this fund is going to lead the way. It will own the hottest stocks that are attracting buzz and buying power from both retail and institutional investors.
It will be almost impossible for BUZZ to not outperform the broader indexes. This new ETF will only own the hottest stocks in the index and avoid the dullards and those stocks that drags on performance.
Another benefit: BUZZ is only going to buy companies with market capitalizations of $5 billion or more. That could help solve some of the liquidity issues that may be crippling for ETFs holding less liquid issues when we do finally see a bear market.
Of course, if you're neutral about the outlook for markets or are risk-averse, then you'll want to skip this ETF.
And if you're bearish on stocks, then the BUZZ ETF is a great target for put options, once they're available.
The index results we have seen only go back five years, which has been a raging bull market for the most part. When markets go bad, the stocks best loved by smaller investors could get crushed as institutions begin to dump stock to meet redemptions and give themselves a buffer against volatility.
There are no options on BUZZ yet, but I suspect there will be at some point. When that happens, BUZZ could be an options trader's dream ETF.
For all his silliness and crude behavior, Dave Portnoy may have helped introduce one of the best ETFs for a trader's tool box in a long time.
Beyond just trading, BUZZ is also going to be a fantastic tool for investors looking to ride the strongest stocks higher during a bull market.
If you see Dave Portnoy out and about, buy the man a slice of pizza.
BUZZ could be one of the more innovative and useful ETFs introduced in a long time.
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