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  • Thematic Investing

    BUZZ Investing: Sentiment Moves Against the Grain with PayPal and Zillow

    VanEck
    November 19, 2021
     

    Domestic equities rebounded sharply as the vast majority of U.S. based companies that reported third quarter earnings beat consensus analyst expectations, providing a tailwind to positive investor sentiment throughout the month. The benchmark S&P 500 Index reached new all-time highs. Readings of consumer price inflation, which first spiked at the end of the second quarter, remained elevated at their highest levels in many years. Within the current inflationary environment, many market prognosticators now forecast an accelerated pace of interest rate hikes by the U.S. Federal Reserve (the “FED”). The combination of higher inflation, continued strain within global supply chains, and the highly anticipated announcement of the FED tapering its bond buying program had little impact on longer term interest rates, as the benchmark U.S. 10-year Treasury Bond was little changed.

    The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) returned 6.16% during the month of October and trailed the S&P 500 Index by 2.67% year to date (21.37% vs. 24.04%, respectively), but led by 12.61% over the last year (55.52% vs. 42.91%, respectively) as of the end of the month. Continue reading for details on recent performance and the latest Index reconstitution.

    Plug Power Once Again Leads Advancing Stocks within the BUZZ Index

    Plug Power (NASD: PLUG), Tesla (NASD: TSLA) and Advanced Micro Devices Inc. (NASD: AMD) led advancing stocks during the recent period between selection dates of the BUZZ Index. After months of trading in a range primarily between $20 - $30, shares of PLUG broke to the upside as renewed interest in the clean energy sector stoked investor sentiment. Investment bank Morgan Stanley upgraded their price target for PLUG, noting they expected strong revenue growth and improved operating margins from the world’s leader in hydrogen energy fuel cell solutions. TSLA soared past a trillion-dollar valuation as investors cheered a rumored announcement that car rental giant Hertz Global Holdings (NASD: HTZ) had placed an order for 100,000 Tesla vehicles by the end of 2022, an order that was seen as the biggest-ever electric-vehicle purchase. AMD shares surged, posting their best day in 15 months, after rising more than 10% on November 8th, as the company announced new products and disclosed that Facebook parent Meta Platforms Inc. would use its Epyc processors.

    Top Contributors: October 14, 2021 – November 11, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Plug Power Inc PLUG 3.12 0.99
    Tesla Inc TSLA 3.75 0.95
    Advanced Micro Devices Inc AMD 3.33 0.90
    NVIDIA Corp NVDA 2.41 0.78
    QuantumScape Corp QS 1.13 0.69
    Ford Motor Co F 2.06 0.49
    Pfizer Inc PFE 1.81 0.34
    GameStop Corp GME 3.00 0.33
    Coinbase Global Inc COIN 1.92 0.29
    Macy's Inc M 0.69 0.24

    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.

    On November 5th, pharmaceutical giant Pfizer Inc (NYSE: PFE) shook up the competitive COVID-19 vaccine market by announcing that its COVID-19 pill cuts the risk of severe COVID-19 by nearly 90%1. Encouraged by positive results, which showed strong evidence that the antiviral pill decreases the chances of hospitalization or death for high-risk adults, Pfizer decided to stop the trial early and seek approval from the Food and Drug Administration for widespread use. PFE further remarked that the pill could be ready for delivery this year. The news sent shares of PFE soaring more than 10%, a gain that contributed to the stock’s position as the seventh leading contributor to performance during the period between the October and November selection dates of the BUZZ Index. While shares of PFE soared, competitor vaccine manufacturers tumbled on the news, with shares of Moderna (NASD: MRNA) pacing decliners within the segment. The news from PFE came the day after MRNA reported quarterly sales and profit that badly missed estimates, sending its stock tumbling more than 17%. After providing lowered guidance for its forecast of vaccine sales for the balance of the year, news of the successful PFE pill proved to be the second blow in a one-two punch that left shares of MRNA down more than 31% in just two days. This set the stage for the stock to pace decliners within the BUZZ Index during the latest period between selection dates.

    Bottom Contributors: October 14, 2021 – November 11, 2021
    Company Ticker Average Weight (%) Return Contribution (%)
    Moderna Inc MRNA 2.59 -0.93
    Upstart Holdings Inc UPST 1.57 -0.70
    DraftKings Inc DNKG 2.33 -0.46
    Virgin Galactic Holdings Inc SPCE 1.45 -0.41
    Snap Inc SNAP 0.83 -0.35
    Peloton Interactive Inc PTON 1.02 -0.33
    Roku Inc ROKU 1.87 -0.32
    Twitter Inc TWTR 1.11 -0.23
    Palantir Technologies Inc PLTR 2.97 -0.16
    Penn National Gaming Inc PENN 0.70 -0.15

    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 Stock Highlight: General Electric

    In a defining moment for General Electric (NYSE: GE), on November 9th, the company announced that it will split into three separate companies2. GE was formed through the 1892 merger of Edison General Electric Company of Schenectady, New York, and Thomson-Houston Electric Company of Lynn, Massachusetts. In 1896, General Electric was one of the original 12 companies listed on the newly formed Dow Jones Industrial Average, where it remained a part of the index for 122 years, though not continuously. To many, the break-up of GE signaled an end of the ‘conglomerate-era’ of Corporate America.

    Under the leadership of famed CEO Jack Welch, GE aggressively grew throughout the 1980s and 1990s, expanding into financial services through its GE Capital division and entertainment assets through its NBC affiliates. During Welch’s run, the company experienced tremendous growth and was viewed by many as the envy of Wall Street, as it achieved the sought-after title of the largest public company by market value. The 2008 financial crisis hit GE hard as leverage within its financial services divisions, together with the effects of a global recession across its high fixed cost infrastructure divisions, resulted in a significant blow to the company’s operations. Led by Jeff Immelt, who replaced Welch as CEO four days before the September 11th terrorist attacks, GE pivoted to a growth through mergers and acquisitions model, which produced mixed results. Fallout from the financial crisis and difficulties in delivering on large-scale acquisitions, GE dramatically underperformed in the ensuing years, resulting in its removal from the Dow Jones Industrial Average in 2018.

    GE will spin off its health-care business in early 2023 and plans to combine its renewable energy, fossil-fuel power and digital units into a single energy-focused entity that will spin off in 2024. Once the spin-offs are complete, the remaining company will solely consist of GE Aviation, its jet-engine division. GE has been a long-time constituent featured within the BUZZ Index. Over the past four years, positive investor sentiment has proved uninformed, as the collective ‘value-call’ relating to the company proved to be a ‘value-trap’ as its shares continued to trend lower. GE’s weight within the BUZZ Index has steadily drifted lower throughout 2021 (together with the amount of online discussion relating to the company), as investor sentiment has soured amid continued poor share price performance. GE was removed from the BUZZ Index during the scheduled October 2021 rebalance, a sentiment reflection that investors had given up on the prospects for the company. The breakup announcement appears to have rekindled investor interest and GE’s absence from the BUZZ Index has proven short-lived. Positive investor sentiment turned tepidly positive toward the once-famed conglomerate, as investors cheered the prospects of the newly formed companies. GE re-enters the BUZZ Index at the November scheduled reconstitution with a 0.52% weight.

    General Electric Company (GE) Stock Price: January 1, 2021 - November 12, 2021

    General Electric Company (GE) Stock Price: January 1, 2021 - November 12, 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 November 2021 Rebalance Highlights

    PayPal Holdings

    The largest addition to BUZZ Index this month is PayPal Holdings (NASDAQ: PYPL), a stock which has been mired in a downtrend in recent months. Regarded as one of the pioneers of online digital payments, PYPL has consistently been one of the largest and most trusted companies in the industry. Since its spin-off from eBay (NASDAQ: EBAY) in 2015, the stock has increased over 700%, with its price appreciation accelerating since the onset of the COVID-19 pandemic, which hastened the digitization of the world. After peaking at just over $300 per share in August of this year, PYPL has steadily lost momentum. Traditional equity analysts raised concerns regarding the company's proposed acquisition of Pinterest (NYSE: PINS) at a $39 billion valuation. As valuation concerns weighed on the company’s share price, PYPL shares fell a further 10% on November 9th, as the company reported disappointing Q3 earnings, while lowering revenue and EPS guidance for the fourth quarter. All told, shares of PYPL have tumbled by nearly a third in just over three months, settling at near $200 per share. As PYPL’s share price has fallen, investor sentiment has sharply increased, reflecting investors' continued confidence in the company. Collectively, positive investor sentiment reflects a view that PYPL may represent good value at its current price with continued prospects for future growth. As what some may view as a ‘contrarian’ play, PYPL re-enters the BUZZ Index this month at a maximum 3% weight.

    Zillow Group

    Another notable addition to the BUZZ Index this month is Zillow (NASDAQ: Z), which like PYPL may be viewed by some as a ‘contrarian’ play. The company, which operates an online real estate marketplace, has been one of the fastest growing companies in the industry, removing fee barriers and providing customers with access to listings through its network of media subsidiaries. In 2018, the company embarked on a new business line which involved purchasing and then ‘flipping’ homes, believing the initiative that leveraging its vast amount of home sales data would be profitable. After reaching a low of $20 in March 2020, Z skyrocketed 10-fold to over $200 per share over the following year. Since then, the stock has steadily grinded lower, pulling back by 50% by the end of October 2021. Earlier this month, the company shocked the markets when it announced it was exiting the home-flipping business, citing flawed pricing algorithms, which led the company to overpay for many homes in 2021. The business line suffered a $550 million loss and the company laid off a quarter of its workforce. The announcement triggered a three-day slide in the stock of almost 40%, leaving it trading near $60 per share. The sharp decline in price led to an increase in positive investor sentiment, suggesting investors believe the weakness to be a ‘buy-the-dip’ opportunity on an innovative company whose core business remains sound. Z enters the BUZZ Index this month with a 1.31% weight.

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

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    Important Disclosures

    1 Source: AP News, Pfizer says COVID-19 pill cut hospital, death risk by 90%, November 5th, 2021.

    2 Source: Reuters, GE, an industrial conglomerate pioneer, to break up, November 10th, 2021.

    Company data is the source for all particular company information quoted.

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