If you’re looking for stocks to buy from the VanEck Vectors Social Sentiment ETF (NYSEARCA:BUZZ), you need to be forewarned that it doesn’t focus on cannabis stocks despite the opportune stock symbol.
No, BUZZ tracks the performance of the BUZZ NextGen AI US Sentiment Leaders Index, an index that uses artificial intelligence to follow sites such as Reddit and Stock Twits, identifying companies getting positive sentiment from investors.
Barstool Sports founder Dave Portnoy backs the exchange-traded fund. Portnoy has made a name for himself in the investment world for being anti-establishment, which makes the marriage between the two puzzling.
However, before you dismiss the ETF because of its Portnoy association, it’s important to realize that the science behind the fund makes total sense.
Just as people go to restaurants recommended by friends, investors are more willing to take a closer look at stocks getting substantial amounts of positive chatter. That tire-kicking often turns to actual stock purchases and tangible momentum.
While you might be skeptical, over the past year through March 10, Buzz has a total return of 97.7%. Over the past five years, it has an annualized total return of 25.5%. With that in mind, here are several stocks to consider:
- DraftKings (NASDAQ:DKNG)
- Plug Power (NASDAQ:PLUG)
- Pinterest (NYSE:PINS)
- Square (NYSE:SQ)
- Roku (NASDAQ:ROKU)
- Enphase Energy (NASDAQ:ENPH)
- Activision Blizzard (NASDAQ:ATVI)
As they say, the proof is in the pudding. Here are my seven stocks to buy with Buzz.
Stocks to Buy From Buzz: DraftKings (DKNG)
An interesting aside, DraftKings is the ETF’s third-largest holding with a weighting of 3.24%. Portnoy’s firm is 36%-owned by Penn National Gaming (NASDAQ:PENN). In 2023, Penn has the option to buy majority control. In the meantime, PENN stock is the 16th-largest position with a weighting of 2.02%.
As InvestorPlace’s William White wrote recently, star portfolio manager Cathie Wood’s ARK Innovation ETF (NYSEARCA:ARKK) has acquired almost one million shares of the sports betting and fantasy sports platform.
While DKNG isn’t a top 10 holding — it’s 50th out of 56 — you’ll notice that Penn isn’t anywhere to be found. She may add it at some point, but for now, DraftKings is the only game in town.
InvestorPlace contributor Josh Enomoto recently suggested that DKNG stock should be a hot commodity for years to come. I couldn’t agree more.
In November, I suggested that DKNG had the legs to go to $100 or higher. At the time, it was trading around $48. Nothing has changed my mind. In fact, I believe it could grab almost 50% of the sports betting market share by 2025.
It’s one of my favorite long-term buys in 2021 and beyond.
Plug Power (PLUG)
For those unfamiliar with Plug Power, it has commercialized hydrogen and fuel cell technology for the logistics industry. Its GenDrive products power forklifts are used in distribution centers and other industrial warehouse settings.
Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT) are its two biggest customers. Both have warrants to buy big chunks of Plug Power. To date, they haven’t, which is why I cautioned investors in December to wait for its share price to fall into the low $20s before considering it a worthy contender among stocks to buy.
Despite admiring CEO Andy Marsh’s capital allocation abilities, I had a nagging doubt about its stock’s ability to keep rising, given neither of its biggest customers had exercised warrants that were worth hundreds of millions of dollars.
Hey, sometimes discretion is the better part of valor.
Do I think buying in the low $20s is still realistic? No, I do not.
Plug Power’s weighting in BUZZ of 2.14% makes it the ETF’s 14th-largest holding. That says something about investor sentiment.
At this point, I would say it’s okay to buy into PLUG in the low $40s. However, if you’re risk-averse, you might buy half a position and wait to see if it falls into the $30s.
After the year Pinterest has had in the markets — it’s up 316% over the past 52 weeks — it’s not surprising that its momentum has slowed. It couldn’t possibly keep up such a torrid pace.
Nonetheless, of all the social media platforms, Pinterest is easily my favorite for personal use. I use Facebook (NASDAQ:FB) to remind me of birthdays; I use Twitter (NYSE:TWTR) if I want to sound off on an article I’ve read, but that’s rare, and I have no time for the rest.
Back in November 2019, I recommended investors ought to buy PINS stock when it was trading around $20, just a dollar above its April 2019 IPO. I argued that when its international average revenue per user (ARPU) gets to $1, Pinterest would be making money on a GAAP basis.
So, where are we at on that front?
At the end of 2020, its international ARPU was 88 cents, 12 cents away from the Holy Grail. That’s up from 13 cents when I made the statement. In the fourth quarter, Pinterest had GAAP earnings of $208 million. However, in the year, it lost $128 million on a GAAP basis, and on a non-GAAP basis, it made $283 million.
It should generate a full-year GAAP profit in 2021, and most definitely, international ARPU will blast through a dollar.
It’s a big-time-buy for the long haul.
CEO and co-founder Jack Dorsey sold some Square stock in January. This prompted me to wonder if investors to do the same. I concluded that it would likely hit $300 before the end of 2021.
Thanks to the tech correction of the past month, SQ is trading well below its 52-week high of $283.19, which it hit in mid-February. Oh, so close!
Still 17% off its 52-week high, I would definitely consider taking a position at these prices. In five years, I’m confident you won’t be complaining about paying too much in 2021.
JPMorgan & Chase (NYSE:JPM) recently filed documents with the Securities and Exchange Commission that will see it launch the J.P. Morgan Cryptocurrency Exposure Basket, a collection of 11 reference stocks directly or indirectly related to cryptocurrencies.
So, if you buy a $1,000 note and the stocks’ performance in the basket delivers a 50% return over the one-year hold, you will get back $1,485, which subtracts 1.5% on the principal for J.P. Morgan’s fee.
If it were me, I would dump RIOT and OSTK, take that $1,000 and buy fractional shares of the remaining nine stocks, and adjust the weightings to account for this.
Under this scenario, SQ would represent 22% of the portfolio [$180 divided by 1,000 less $170 for the two stocks excluded].
It’s hard to believe, but in 2020, I only wrote about the video streaming platform on three occasions: In January 2020, when I called it a screaming buy under $100, in March 2020, when I reiterated my $100 buy and in April 2020, when I suggested advertising revenue growth would push ROKU higher.
In December 2019, I called it the stock of the year. I also recommended it as a long-term buy. Since then, it’s up 160% through March 10.
My argument then, and now, is simple. If it continues to grow its active accounts and viewing hours of those active accounts, advertising revenue has only one place to go.
On Feb. 18, Roku announced its Q4 2020 results. Its active accounts at the end of 2020 were 51.2 million. The streaming hours at the quarter’s end were 17 billion. The active accounts when I wrote my 2019 piece were 23.8 million. The streaming hours were 6.2 billion.
Active accounts increased 115% over five quarters, while viewing hours increased by 174%. The average hours streamed per active account at the end of Q4 2020 was 332.0, up 27% since Q3 2019.
Not surprisingly, its Q4 2020 revenue was up 55% over the same period last year.
I continue to expect big things from Roku in 2021 and beyond.
Enphase Energy (ENPH)
I don’t think you can have an ETF like BUZZ focused on positive investor sentiment and not have a few clean energy stocks. Plug Power is one, Tesla (NASDAQ:TSLA) is another, and of course, Enphase is a third.
Now, it too has suffered so far in 2021. Down 13.1% YTD, ENPH has lost more value over the past month than Tesla’s stock.
InvestorPlace contributor Muslim Farooque recently recommended Enphase as one of three renewable energy stocks to buy. Farooque believes that its ability to generate profits and cash flow makes it an excellent long-term play. My colleague also thinks it will grab additional market share in the years ahead.
In the past three years, Enphase’s free cash flow has gone from $22 million in 2018 (7% of revenue) to $124.3 million in 2019 (20%), to $198.9 million in 2020 (26%).
Based on a current enterprise value of $20.1 billion, Enphase has an FCF yield of 1%. That might not seem great, but when you consider that it’s growing revenues by 25% or more each quarter, the premium multiple is more than justified.
Every time I look at this company, I can’t help but be optimistic about its future and its shareholders.
Activision Blizzard (ATVI)
Here’s an interesting tidbit: Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, took large positions in three video game companies at the end of 2020.
The fund doled out more than $3.3 billion for ATVI, Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO). Of the three positions, Activision Blizzard was its biggest, gobbling up 14.9 million shares.
Like Saudi Arabia, Norway’s sovereign wealth fund has moved away from oil to ensure the country has plenty to fund its future. At the end of 2020, according to pg. 30 of its annual holdings report owned $786 million in ATVI stock, accounting for 1.1% of its total equity holdings.
Together, these two nations own more than $2 billion of the company. There must be a reason despite its stock gaining 51% over the past year.
Interestingly, ATVI reported excellent earnings on Feb. 4, and yet its stock has basically gone sideways after a momentary surge post-earnings.
The report’s highlights include a 25% increase in 2020 revenues, a 39% increase in non-GAAP earnings per share, and free cash flow for the trailing 12 months was 27% higher year-over-year.
As InvestorPlace’s Matt McCall stated shortly after Activision Blizzard reported its earnings, the industry is booming and likely to continue so.
I couldn’t agree more.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.