So-called meme stocks — or buzzworthy tickers investors like to talk up on social media — are making a comeback. But they look very different this time.
Meme stocks have mostly grown up since the last time they were popular. And more important, they're paying off.
The VanEck Social Sentiment ETF, which holds roughly 75 stocks commonly discussed online, returned 45% this year, says Morningstar Direct. That puts it in the top 10 best-performing U.S. actively traded diversified ETFs this year.
It also means this four-year-old, meme-loaded ETF is outperforming the S&P 500's 14.3% total return this year. Investors, though, remain skeptical. The fund only holds $111 million in assets.
"While BUZZ is having a great year, the ETF remains largely unknown to investors," said Todd Rosenbluth, director of research at TMX VettaFi.
What's A Meme Stock Now?
Following the meme stock crash of a few years ago, the types of companies being bandied about has changed a bit.
Yes, you'll find speculative plays in the social sentiment ETF like AST Spacemobile, a maker of space satellites. It's the top holding in VanEck Social Sentiment at nearly 4% of the portfolio. And popular digital security stock Palantir Technologies is in there as well, at 3%.
But you also find giant and profitable companies like Tesla at 3.2% and Apple at 3.1%. Additionally, there's the less-than-exciting ailing semiconductor firm Intel at 3.3%. Shares of Intel are up 55% this year following bailouts from the U.S. government and Nvidia.
"The portfolio is a mix of established companies ... as well as some companies less likely to be held in many other ETFs," Rosenbluth said.
Amazingly, struggling video game retailer and originally a quintessential meme stock, GameStop, still shows up in the ETF. But it ranks just ninth in portfolio size at 3%. Shares of GameStop are down 16% this year as consumers opt to simply download games, rather than buying them in a physical store.
Rival Meme Plays
The meme stock phenomenon largely faded away with the pandemic. But there are still remains of the craze in the world of ETFs.
VanEck Social Sentiment's most direct rival is SoFi Social 50 ETF. It holds the 50 most widely held stocks on SoFi's own brokerage platform. It is even smaller with $35 million in assets than the VanEck one. Tesla is the top holding of the SoFi Social 50 ETF at a large 11.8% position, followed by a 8.5% position in Nvidia.
And these social and meme stock ETFs rhyme with other much more popular funds that own the stocks with the most momentum. Invesco S&P 500 Momentum returned more than 28% this year owning the top-performing stocks in the past year.
"The demand for (social) ETFs is significantly weaker than Invesco S&P 500 Momentum, which gathered more than $7 billion of new money this year by owning S&P 500 companies with the best relative strength in performance," Rosenbluth said. SPMO has more than $13 billion in assets.
Such socially inspired ETFS offer an interesting look at the types of stocks popular with investors. But they're not designed to be the core of your own portfolio.
"Crowdsourcing investment ideas can be fun but investors should own ETFs that fit with their objectives not other peoples," Rosenbluth said. "Other investors might tell you what to buy but they're less likely to tell you when to sell."
Top Social Stocks
Biggest holdings in VanEck Social Sentiment ETF
| Company | Ticker | % of net assets | YTD % ch. |
|---|---|---|---|
| AST Spacemobile | ASTS | 3.9% | 158.3% |
| Intel | INTC | 3.3% | 55.7% |
| Tesla | TSLA | 3.2% | 9.6% |
| SoFi Technologies | SOFI | 3.1% | 84.7% |
| Palantir Technologies | PLTR | 3.0% | 137.4% |
| Apple | AAPL | 3.0% | 0.8% |
| Hims & Hers Health | HIMS | 3.0% | 120.2% |
| GameStop | GME | 3.0% | -16.2% |
| Robinhood Markets | HOOD | 2.9% | 240.3% |
| Alphabet | GOOGL | 2.9% | 30.6% |
