A new ETF has been launched, and momentum traders might want to take notice. Roundhill Investments’ Meme ETF (MEME) looks to ride the updraft in meme mania, but without the concentrated exposure of merely buying GameStop (GME) - Get GameStop Corp. Class A Report or (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report stocks AMC alone.
Today, Wall Street Memes reviews this ETF at a high level, and briefly talks about how the fund finds “mooning opportunities” among less-known stocks.
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MEME’s key features and criteria
Behind Roundhill’s ETF idea is the potential upside of investing in a couple of hot themes in 2021: (1) the rise of retail investor and (2) the emergence of social investing.
The management firm highlights that “retail has accounted for 21.3% of total equity volume in 2021”. And according to the SEC, the rising popularity of certain stocks among retail investors has certainly contributed to at least one — GameStop stock — climbing viciously earlier this year.
The Meme ETF is very new, having launched in December 2021. It is also very small, at an AUM (assets under management) of only $2.2 million and daily traded volume of 260 shares, according to Seeking Alpha. The management fee is moderate, at 0.69% per year.
The fund’s stock-picking methodology is intriguing:
- Stocks in a large universe are assigned a “social media activity score”, which is basically a method for sorting stocks based on the number of mentions on certain social media platforms.
- The top 50 most popular stocks are then ranked based on short interest, from most shorted to least shorted. The top 25 names are selected for the ETF.
- The process is repeated every 14 days, ensuring that the portfolio is refreshed to reflect the latest trends and data every couple of weeks.
Top holdings now: DWAC, ROKU and WISH
Clearly, investing in meme mania through the Meme ETF goes beyond buying and “HODLing” GME and AMC. In fact, none of these stocks are currently a top 10 holding in the portfolio. The 3 largest components today are Digital World Acquisition (DWAC) , Roku (ROKU) - Get Roku, Inc. Class A Report and ContextLogic (WISH) - Get ContextLogic, Inc. Class A Report.
(Read more from MavenFlix: Roku Stock: Why It Spiked This Week)
DWAC stock has been trading for only about three months, but the share price has already swung wildly. A few weeks ago, we talked about how this stock took off on the news of former US President Donald Trump’s newly formed Trump Media & Technology Group and social media platform True Social. DWAC has been up more than 400% since late October.
ROKU stock is a better-known household name. Our sister channel MavenFlix has just covered the topic, after this stock spiked 20% in one single day. ROKU seems to be a potential meme target due, in great part, to the uncomfortable losses of over 50% since late July 2021.
Lastly, WISH stock has been frequently covered on our channel. This name looks like a “meme cocktail”, due to a combination of (1) massive losses of nearly 90% since late January 2021, (2) stratospheric short interest ratio of 25% of the float, and (3) Wall Street price targets that still suggest upside potential ahead.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)