NEW YORK – Interested in trading some of the stocks that have rocked Wall Street recently fueled by social media buzz? Has the craziness of the comments talking up the so-called meme stocks on Reddit and other sites kept you away? Well, the financial industry has something for you.
On Thursday, investment firm VanEck expects to list an exchange-traded fund called the VanEck Vectors Social Sentiment ETF under the ticker symbol “BUZZ.” It will track an index of U.S. stocks getting mentioned often in investment-related posts on social media, news articles and online discussion forums.
Such stocks have forced Wall Street to pay much more attention to what smaller investors are doing, as they communicate with each on the internet and pitch ideas for stocks to pile into. Sometimes the conditions are so ripe for the stock to burst higher that it can soar far past what any analyst could imagine.
GameStop, the financially struggling video-game retailer looking to transform its business, is the poster child for the phenomenon. It surged more than 1,600% in January as an army of smaller-pocketed and novice investors poured in. Some were looking to hurt the hedge funds and other professional investors that had bet GameStop's stock would fall.
BUZZ, though, doesn't include GameStop at the moment. It also doesn't hold another stock that an outsider might consider buzzworthy: Rocket Cos. The company's stock more than doubled in the three days through Tuesday after getting more attention on Reddit's WallStreetBets forum and other social media venues.
The index underlying BUZZ updates what stocks it includes once a month, and they have to meet several criteria. Among them: A stock must have a market value of at least $5 billion, which would preclude some of the smaller companies getting talked up on social media. Its biggest holdings include DraftKings, Twitter and Ford Motor, each of which make up more than 3% of the fund's total investments.
Investing in BUZZ also comes with a price tag, as almost every fund does. It will carry a 0.75% expense ratio, which means that 75 cents of every $100 invested in the fund will go toward covering its annual fees. That's higher than the average expense ratio of all stock index ETFs, which was 0.49% in 2019, according to the Investment Company Institute. The most popular ETFs have fees much lower than that, and a handful have zero expenses.
It may seem incongruous for the financial industry to offer an ETF based on a movement that often puts professional investors and Wall Street generally atop its list of enemies.
But fund companies are opening more than 200 ETFs every year, as they try to tap into phenomena and fads to see what will stick in the marketplace. That also means many ETFs are closing every year, too, with 110 shutting in 2019.