This week is shaping up to be a very interesting one on Wall Street. Investors are obviously in two camps on the carefully watched stock sector. There are those who are loading up as prices fall on their favourite tech giants, and there are those who are looking at the valuations and at the bond market and wringing their hands about the direction of the economy. It is proving to be tough being long or short US tech stocks this week.
VanEck Vectors Social Vectors Social Sentiment ETF (NYSE:BUZZ)
We’re still with the social sentiment craze and this ETF, which was launched by day trader Dave Portnoy with ETF specialists VanEck. This pursues a concept we’ve been familiar with for some time, and is a less sophisticated version of some more complex systems we’ve seen in use internally at banks like JPMorgan and Goldman Sachs (back in our hedge fund days). Artificial intelligence is used to buy and sell the 85 stocks which are seen to be trending on social media. But it’s all about the constraints here – there are limitations to how fast even an ETF and its brokers can react to the memes and trends flying around the market, and many of these involve stocks that could prove hard for a big ETF to get in and out of.
While we are on the subject of seemingly doomed tech stocks, Snowflake is having a shocker. The stock came off a high initially in December, when it slipped from around $388 to find a new home in the $265-300 trading range. But in recent days Snowflake has taken a further hammering, with the shares now down to $230. As ever, Snowflake has its devotees, and they bought into the stock yesterday, pushing it up 7%. But it looks very volatile and the trend is still downwards. At this rate it will be past $200 in a matter of days. We looked at Snowflake three months ago and at the time we concluded it was “radically overvalued and does not fit our criteria for a buy.” We also said the valuations looked like “fantasy.”
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Invesco QQQ ETF (NASDAQ:QQQ)
It’s all about the NASDAQ 100 index this week. Investors are moving away from their focus on single stock names and taking positions on either side of the index. We went short the NASDAQ ourselves on Friday. We noted the high premium on 30 day options prices on both the index and some ETFs in the space. Yesterday saw the NASDAQ attempt a rally. Lots of retail investors in the US seem to still be lining up on the long side of the NASDAQ, hence the interest in the Invesco QQQ ETF. This tracks the index and loaded up with the usual suspects. Note that according to Invesco it currently has a 12.25% allocation to Apple (AAPL) and another 9.13% in Microsoft (MSFT). It has a whopping 48% in information technology stocks and 19% in communication services. The ETF was still trading up 0.07% in the pre-market at time of writing.
Second Sight Medical Products (EYES)
Can we get away from the NASDAQ now please? In the real economy, Second Sight Medical Products announced that the Food and Drug Administration had approved its Argus 2s Retinal Prosthesis system for the treatment of retinitis pigmentosa. Second Sight sits in a very interesting space, the search for artificial solutions to blindness in its many forms. Second Sight stock was trading at $1.48 last week – nobody was watching this and the FDA announcement prompted a sudden rush for stock. The price broke $18 in a matter of days. This demonstrates clearly the massive returns you can make in the biotech space. We don’t think Second Sight is finished yet. It is also working with a French company on a bionic eyes project. Yes, that’s right, bionic eyes. What’s not to like here? Fans of the Six Million Dollar Man take note.