New fund tracks ‘meme stocks’ after GameStop saga caught Wall Street off guard

Buzz Indexes founder Jamie Wise, who is also CEO of hedge fund Periscope Capital, told CNN Business that the company adds and removes stocks in the index at the end of each quarter but always maintains a market value minimum of $5 billion for any of its investments. That explains why, despite the significant buzz, GameStop (GME) is not in the index — at least not yet.

At the end of December, GameStop was worth $1.3 billion. Following its stunning surge to start the year, the retailer now has a valuation of $8.2 billion. Barring a major collapse this month, GameStop will be eligible to be added to the fund — provided there continues to be enough bullish chatter about it on social media to make it BUZZ-worthy.

There’s more to social investing than WallStreetBets

Although some investors are trying to get rich quick with short-term trades in stocks hyped on Reddit’s popular WallStreetBets board, the BUZZ fund will base most of its investment decisions on more mainstream chatter about blue-chip stocks from users on Twitter and the investing site StockTwits — and not Reddit.

“The timing of the fund’s launch was coincidental with the rise of the individual investor,” said Edward Lopez, head of ETF product for VanEck. “But it has highlighted a trend that has been growing for a number of years.”

Buzz Indexes uses AI to comb through more than 15 million stock-related social media posts each month, Wise said, and then ranks the stocks in the index based on which ones have the most favorable comments.

“We’ve long held that there could be value from the insights of the collective wisdom of individual investors,” Wise added. “But the rise of WallStreetBets is a symptom of a growing trend, not the cause of it. The trade ideas on Reddit and TikTok are a little more niche.”

It’s also worth noting that the fund only plans to invest in stocks it thinks will increase in value. Wise said that the index does have data about companies that are viewed negatively on social media, but the firm doesn’t intend to launch a separate fund to short-sell stocks based on that data.

“We want to focus more on positive sentiment,” Wise said.

Barstool’s Portnoy is a part owner of Buzz Indexes

After Buzz Indexes invested in Penn, Bartstool founder Dave Portnoy, one of the more active traders on social media, decided to take a stake in the index.

“He is a partner and equity owner so he is involved with the index side,” Wise said. “Back in the fall, we had noticed that Penn National Gaming came into the index for the first time so we reached out to him and he got immediately excited.”

But Lopez pointed out that VanEck is merely licensing the index from Buzz Indexes for its ETF and that it has no affiliation with Barstool or Portnoy.

Still, it remains to be seen whether the fund can keep up this pace indefinitely. And this isn’t the first time Buzz Indexes has launched a social media-based stock fund.

It is possible though that the initial BUZZ ETF was ahead of its time. Much has changed in the world of social media in just the past two years — and the endorsement of Portnoy and Barstool could give the fund a bit more buzz when it begins trading Thursday.