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Ride the Renewed Meme Stock Wave With This New ETF
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After staying calm for a few months, the craze for meme stocks roared back with U.S. equities nearing record highs. This is especially true as the most popular meme names such as videogame retailer GameStop (GME - Free Report) , movie theater operator AMC Entertainment Holdings (AMC - Free Report) and Blackberry (BB - Free Report) saw their share price rally 38.3%, 133.8% and 33.9%, respectively, over the past week.
The move has also been rampant in cryptocurrencies. Dogecoin gained spotlight following the news that the meme currency would start trading in Coinbase Pro — one of the world’s largest cryptocurrency exchanges — starting Jun 3. The cryptocurrency also saw investors’ interest in mid-May after a tweet from billionaire enthusiast Elon Musk, which says that he was working with Dogecoin developers to improve the efficiency of transactions (read: Should You Invest in Bitcoin, Coinbase or Blockchain ETFs?).
Inside Meme Investing
Meme investing is a new concept in the equity world and has gained popularity among the youth in recent months. Meme stocks are those that grabbed immense investor interest due to hype on social media and online forums like Reddit, WallStreetBets and Robinhood, rather than the company fundamentals, resulting in a surge in volumes and share price. Thus, these are considered speculative.
Meme stocks are triggered by small traders who cause a short squeeze on the stock. Short squeeze is a term used by market participants to refer to a phenomenon where short sellers in a stock, who have placed their bets on its fall, rush to hedge their positions or buy the stock in the event of an adverse price movement, in order to cover their losses. This leads to a sharp rise in demand for shares, and a huge rally in share prices.
However, investing in these stocks is a risky choice and could result in heavy losses. This is because when excitement surrounding the stock cools down, it could lead to a freefall in share price and investors end up losing their capital.
In order to capitalize the fervor of meme stocks, Tuttle Capital Management last week launched FOMO ETF that could lower the risk of investing in a single stock. It offers investors a new tool for leveraging the retail trading boom by investing in all the buzziest “meme stocks” and funds.
FOMO in Focus
The new actively managed ETF seeks to provide capital appreciation and offers investors a way to avoid missing out on market trends. It takes its name from the phrase “Fear of Missing Out” , which is commonly defined as social anxiety stemming from the belief that others might be enjoying something while the person suffering the anxiety misses out. The fund allows investment in areas of the market currently favored by retail and individual investors, thus avoiding FOMO.
It selects stocks that have exhibited strong momentum as well as those that have had good long-term performance but have seen a recent abrupt sell-off. Tuttle says this approach is part of how the fund creates smoother returns than most thematic ETFs provide. The ETF can also invest in special purpose acquisition companies (SPACs) and other ETFs or ETNs and cryptocurrencies, according to its prospectus (read: Short SPACs With This ETF).
FOMO can shift exposure to whatever happens to be trending at the time and rebalances weekly so it can stay in line with market trends. Currently, the fund holds 101 stocks with none accounting for more than 2.35% share. Keurig Dr Pepper (KDP - Free Report) , UnitedHealth (UNH - Free Report) and Cisco (CSCO - Free Report) are the top three holdings. The information technology sector dominates the portfolio with 75.8% of assets closely followed by financials (21.8%).
The new ETF comes with an expense ratio of 0.90%.
ETF Competition
Though the new product doesn’t have a direct contender providing exposure to such a theme, it joined the other thematic ETF bandwagon, which could pose some threat. In particular, ARK Invest funds have been garnering immense investor interest lately and are currently dominating the thematic space. These include ARK Innovation ETF (ARKK - Free Report) , ARK Genomic Revolution Multi-Sector ETF (ARKG - Free Report) , ARK Fintech Innovation ETF (ARKF - Free Report) , ARK Next Generation Internet ETF (ARKW - Free Report) and ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) (read: Thematic Investing on the Rise: ARK ETFs Leading the Pack).
Bottom Line
Given that FOMO invests in the hottest and youngest trend of the equity world, it won’t be very difficult for the product to see big inflows and a solid investor interest as long as it generates decent total returns, net of expense ratio. Additionally, the product will no doubt get a first-mover advantage as no other ETFs track meme stocks under one roof.
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Ride the Renewed Meme Stock Wave With This New ETF
After staying calm for a few months, the craze for meme stocks roared back with U.S. equities nearing record highs. This is especially true as the most popular meme names such as videogame retailer GameStop (GME - Free Report) , movie theater operator AMC Entertainment Holdings (AMC - Free Report) and Blackberry (BB - Free Report) saw their share price rally 38.3%, 133.8% and 33.9%, respectively, over the past week.
The move has also been rampant in cryptocurrencies. Dogecoin gained spotlight following the news that the meme currency would start trading in Coinbase Pro — one of the world’s largest cryptocurrency exchanges — starting Jun 3. The cryptocurrency also saw investors’ interest in mid-May after a tweet from billionaire enthusiast Elon Musk, which says that he was working with Dogecoin developers to improve the efficiency of transactions (read: Should You Invest in Bitcoin, Coinbase or Blockchain ETFs?).
Inside Meme Investing
Meme investing is a new concept in the equity world and has gained popularity among the youth in recent months. Meme stocks are those that grabbed immense investor interest due to hype on social media and online forums like Reddit, WallStreetBets and Robinhood, rather than the company fundamentals, resulting in a surge in volumes and share price. Thus, these are considered speculative.
Meme stocks are triggered by small traders who cause a short squeeze on the stock. Short squeeze is a term used by market participants to refer to a phenomenon where short sellers in a stock, who have placed their bets on its fall, rush to hedge their positions or buy the stock in the event of an adverse price movement, in order to cover their losses. This leads to a sharp rise in demand for shares, and a huge rally in share prices.
However, investing in these stocks is a risky choice and could result in heavy losses. This is because when excitement surrounding the stock cools down, it could lead to a freefall in share price and investors end up losing their capital.
In order to capitalize the fervor of meme stocks, Tuttle Capital Management last week launched FOMO ETF that could lower the risk of investing in a single stock. It offers investors a new tool for leveraging the retail trading boom by investing in all the buzziest “meme stocks” and funds.
FOMO in Focus
The new actively managed ETF seeks to provide capital appreciation and offers investors a way to avoid missing out on market trends. It takes its name from the phrase “Fear of Missing Out” , which is commonly defined as social anxiety stemming from the belief that others might be enjoying something while the person suffering the anxiety misses out. The fund allows investment in areas of the market currently favored by retail and individual investors, thus avoiding FOMO.
It selects stocks that have exhibited strong momentum as well as those that have had good long-term performance but have seen a recent abrupt sell-off. Tuttle says this approach is part of how the fund creates smoother returns than most thematic ETFs provide. The ETF can also invest in special purpose acquisition companies (SPACs) and other ETFs or ETNs and cryptocurrencies, according to its prospectus (read: Short SPACs With This ETF).
FOMO can shift exposure to whatever happens to be trending at the time and rebalances weekly so it can stay in line with market trends. Currently, the fund holds 101 stocks with none accounting for more than 2.35% share. Keurig Dr Pepper (KDP - Free Report) , UnitedHealth (UNH - Free Report) and Cisco (CSCO - Free Report) are the top three holdings. The information technology sector dominates the portfolio with 75.8% of assets closely followed by financials (21.8%).
The new ETF comes with an expense ratio of 0.90%.
ETF Competition
Though the new product doesn’t have a direct contender providing exposure to such a theme, it joined the other thematic ETF bandwagon, which could pose some threat. In particular, ARK Invest funds have been garnering immense investor interest lately and are currently dominating the thematic space. These include ARK Innovation ETF (ARKK - Free Report) , ARK Genomic Revolution Multi-Sector ETF (ARKG - Free Report) , ARK Fintech Innovation ETF (ARKF - Free Report) , ARK Next Generation Internet ETF (ARKW - Free Report) and ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) (read: Thematic Investing on the Rise: ARK ETFs Leading the Pack).
Bottom Line
Given that FOMO invests in the hottest and youngest trend of the equity world, it won’t be very difficult for the product to see big inflows and a solid investor interest as long as it generates decent total returns, net of expense ratio. Additionally, the product will no doubt get a first-mover advantage as no other ETFs track meme stocks under one roof.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>