Jacobs notes that there is a misconception about the players in the social media industry, and that a lot of the action is happening beyond the U.S. “In places like China, there is a rapidly expanding group of social media users,” he says. “Those users are growing their incomes faster than those in the U.S., resulting in a lot of opportunity for social media networks. They are acquiring users faster and those users are becoming more valuable from a revenue perspective than users in the U.S.”
Investors have noticed. SOCL, which has an asset base of $165 million, is up 48.4 percent year-to-date. The fund charges 65 basis points.
The Sentiment Premia
BUZ takes a very different approach. While it also seeks to capitalize on social media networks, it does so by employing a rules-based, quantitative methodology designed to identify the 75 large-cap U.S. common stocks with the most “positive insights” collected from social media networks. In other words, BUZ, which charges 75 basis points, uses actual data generated on social media networks to find investment candidates.
“Sentiment has always been a factor that has impacted stock price returns,” says Jamie Wise, founder and CEO of BUZZ Indexes. The problem, he notes, is that there has never been a way to measure sentiment down to the individual stock.
“We can leverage advancements in artificial intelligence and natural language processing techniques to isolate the sentiment premia that has always existed within stock price returns,” Wise says.
He suggests that this environment, where a large number of diverse people independently offer their views, constructs an average consensus view that should be more predictive than any one expert. BUZ observes those data and establishes a baseline for the sentiment around a stock. Through the natural ebbs and flows of conversation around a stock, they then identify when a noticeable shift in positive sentiment—like a wave—starts to build.
The end result is a widely diversified portfolio where sector weightings are determined by the strongest sentiment, which can change dramatically over time—or even quickly. As such, the BUZ fund’s underlying index is reconstituted monthly to keep pace with the investment zeitgeist. It’s weighted using a proprietary scoring model based on investor sentiment.
In short, BUZ is a momentum play.
It’s top 10 holdings include a number of tech heavyweights such as Alphabet, Amazon.com, Microsoft, Apple and Facebook. The top holding, Micron Technology, comprises 3.25 percent of the portfolio, while the 10th-largest holding, Advanced Micro Devices, has a 2.90 percent stake. Trailing close behind are non-tech stalwarts including Home Depot, Walt Disney and Raytheon.