BUZZ Stock: Would Barstool’s Dave Portnoy Buy His Own ETF?

Davey Day Trader strikes again.

What started as a way to pass time during the pandemic-related sports cancellations, the Barstool founder and CEO has parlayed his stock-trading alter-ego into a new payday.

This week Portnoy announced via Twitter he had struck a licensing deal with investment manager VanEck to release the VanEck Vectors Social Sentiment ETF.

As the name suggests, the fund’s strategy is to track 75 large-cap stocks with the most popular sentiment across social-media channels Twitter, Reddit and StockTwits.

Shares of BUZZ have floundered since hitting the markets, falling nearly 10% since their debut (as of 10:50 AM 3/5/20) but is it a long-term buy?

BUZZ Stock: Discover What’s Inside the ETF

At first glance, the ETF’s holdings appear not to be heavily impacted by Reddit stock forum Wall Street Bets. Chatroom favorites like GameStop (NYSE: GME), AMC (NYSE: AMC), and Blackberry (NYSE: BB) are noticeably absent for the top-20 holdings.

Only two of the top ten fund holdings are among the most popular stocks on Reddit according to WSB-tracking site Swaggy Stocks: AMD (Nasdaq: AMD) and Tesla (Nasdaq: TSLA), which rank No. 8 and No. 10, respectively, and collectively comprise 5.4% of net holdings. This could change as the fund will rebalance its holdings monthly.

The top five holdings might not be posted on the NSFW chatroom but have done well in 2021. Unlike the S&P 500 and Nasdaq that are both negative YTD, only one stock in the top five has negative returns and the others have all increased more than 20% during this period.

Stock Fund Percentage YTD Return
Ford 3.4% 38%
DraftKings 3.3% 27%
Twitter 3.3% 21%
Facebook 3.2% (5%)
American Airlines 3.1% 27%

Should You Invest in BUZZ?

VanEck’s BUZZ ETF has an interesting concept based on short-term popularity but it’s long-term investing where wealth is created. Ben Graham, the father of modern investing, famously quipped “in the short run, the market is a voting machine but in the long run, it is a weighing machine.”

The short-term strategy of using social popularity could make it difficult for BUZZ to outperform as the ETF is rebalanced monthly while sentiment is much more ephemeral. For example, the GameStop explosion mostly occurred in the span of two weeks.

BUZZ has a gross expense ratio of 0.75%. This might not sound like much but will eat into long-term returns and make it harder for the ETF to post significant long-term outperformance.

Finally, the ETF seems like the antithesis of what made Davey Daytrader popular with retail traders. His biting commentary against Wall Street made him an everyday hero in stock chatrooms.

In a Fox Business Op-Ed, Portnoy fired off a missive against financial professionals, noting:

“They no longer get a fat commission check every single time the public wants to make a trade. They want the public’s money, but they want to be the only ones allowed to spend it. They want to get paid whether they win or lose.”

While the terms with Portnoy remain undisclosed, typical licensing deals like this net the licensor $1,000 per $1 million AUM – you guessed it, win or lose.

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