BUZZ Investing: U.S. Equities Struggle Amid Macro Pressures

Summary

A diverse mix of stocks contributed to performance in January, while multiple headwinds detracted from overall monthly performance. Spotify and Enphase Energy join the Buzz Index.

Domestic U.S. equities have struggled to start the New Year as geopolitical tensions in Ukraine, heightened domestic inflation expectations and hawkish central bank communications continue to weigh on investor sentiment and valuations. The S&P 500 Index and the technology-heavy Nasdaq Composite each posted their worst January performance in thirteen years. The Russell 2000 Growth Index, which measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values, fell a stunning 13.4% during January, suggesting capitulation-like selling within the market segment where some prognosticators had viewed valuations as being stretched. The BUZZ US Sentiment Leaders Index continues to underperform these key benchmark indices as growth and thematic-related equities featured within the index once again weigh on performance.

The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index” or “Index”) fell -16.11% during the month of January compared to the S&P 500’s fall of -5.17% as of the end of the month. Continue reading for details on recent performance and the latest Index reconstitution.

A Diverse Mix of Stocks Contributed to the Recent BUZZ Index Performance

Peloton Interactive Inc. (NASDAQ:PTON) paced advancing stocks during the recent period between selection dates of the BUZZ Index. The once niche provider of indoor cycling and other fitness related equipment targeted to the home-workout community surged eight-fold following the onset of the COVID-19 pandemic as lockdowns and work-from-home mandates provided huge tailwinds for the company’s business model. As the world’s economies re-opened over the past year, shares of PTON have retraced all of their remarkable run, settling at their pre-pandemic levels by late January 2022. Rumors of a takeover of the suddenly distressed fitness provider, together with a management shake-up headlined by co-founder John Foley relinquishing his title as CEO, rekindled investor spirits and fueled a snap 50% rally in shares of the company. Other positive contributors to performance featured a diverse mix of stocks ranging from the communication services, information technology, energy, and industrials sectors. Beaten down cloud infrastructure and gambling related stocks bounced off recent lows while energy conglomerate Exxon Mobil Corporation (NYSE:XOM) surged alongside the price of crude oil which reached its highest level in over seven years.

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.

The top detractors to performance within the period between selection dates of the BUZZ Index likewise featured a diverse mix of stocks ranging from the healthcare, information technology, communication services and consumer discretionary sectors. COVID-19 vaccine manufacturers once again paced declining stocks within the BUZZ Index as the recent Omicron wave fades, weighing on share prices. Novavax (NASDAQ:NVAX) led declining stocks featured within the BUZZ Index for the second consecutive month as the share price of the biotechnology company, which provides a protein-based vaccine for COVID-19, broke support and traded in the low $80’s following months of price volatility which saw NVAX oscillate between $150 and $250 per share. Shares of automaker Ford Motor Co. (NYSE:F) and social media giant Meta Platforms (NASDAQ:FB) both fell following disappointing earnings reports. FB recorded the largest one-day drop in market value ever for a U.S. company losing more than one-quarter of its value, $232 billion in market capitalization, following a disastrous earnings report and reduced outlook for the social-media firm as it looks to reimagine itself as a “metaverse” company.

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 – Spotify Technology

The largest addition to the BUZZ Index this month happens to be the company at the center of one of the most talked about recent controversies. Spotify (NYSE:SPOT), the biggest music streaming service in the world, also features non-music content such as audiobooks and podcasts. In May 2020, Spotify signed Joe Rogan, the mixed-martial-arts commentator, to an estimated $100MM contract to exclusively provide Rogan’s podcast, The Joe Rogan Experience (JRE). Launched in 2009, the podcast features Joe Rogan talking to various guests on a wide range of topics. Renowned for Rogan’s ability to ask interesting questions and have engaging conversations with guests, JRE ascended in popularity to become one of the most listened-to podcasts in the world, averaging over a million listeners per episode.

Over the past year, JRE has featured several guests discussing topics related to COVID-19, ranging from vaccine efficacy to government-mandated lockdowns, while making various claims that politicians, doctors, and scientists have refuted as ‘misinformation’. The controversy has elevated to the point where several prominent musicians have pulled their music off Spotify’s platform citing the company’s refusal to remove the JRE podcast. While the stock has been mired in a downturn since Q1 2021 amidst the rotation away from growth-related equities, investor sentiment has recently been increasing. It appears investors may not be of the view that the controversy and associated boycotts will have negative long-term effects on Spotify’s platform. This month SPOT re-enters the BUZZ Index with a 1.6% weight, its largest weight since first being featured in the BUZZ Index in June 2020.

Spotify Stock Price | April 2018 – February 2022

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 February 2022 Rebalance Highlight

Enphase Energy

Enphase Energy (NASDAQ:ENPH) is a featured entrant into the BUZZ Index this month. Enphase is a manufacturer of residential solar equipment with operations around the world. Touting a revolutionary method of converting solar energy into electricity, the company has been one of the technological leaders in the industry. Whereas traditional rooftop solar panel networks rely on a single inverter to convert sunlight into energy, Enphase pioneered the development of microinverters, which are smaller inverters built into individual panels, thus allowing for more efficient designs. The company’s successful commercialization of the technology has helped it solidify itself as a global market leader, and over the past four years, the stock has surged from $3 to as high as $250 last year, before correcting 50% over the past two months on fears of increasing competition and supply chain issues. Its latest earnings, however, exceeded expectations as the company demonstrated it was able to successfully pass along price increases to consumers. Enphase is currently in the process of transforming from a pure panel supplier to a complete home energy management company, which it believes will create new avenues of revenue. Investors remain bullish on the company, evident by the jump in positive sentiment this month, which pushed ENPH into the Index with a 0.62% weight.

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.