3 August 2023: Wealth Product Ideas
| Fund Name (Ticker) | The Meme Stock ETF (MEME US) |
| Description | The MEME ETF is the first ETF globally explicitly designed to track the performance of meme stocks. |
| Asset Class | Equity |
| 30-Day Average Volume (as of 01 Aug) | 6,529 |
| Net Assets of Fund (as of 01 Aug) | US$4,715,300 |
| 12-Month Trailing Yield | N/A |
| P/E Ratio | N/A |
| P/B Ratio (as of 01 Aug) | 2.256 |
| Management Fees (Annual) | 0.69% |
Top 10 Holdings
(as of 01 August 2023)
- BUY Entry – 40 Target – 50 Stop Loss – 35
- Short interest. The recent meme stock rallies are driven by individual traders posting their trades and coordinating on social media platforms, leading to unexpected share price gains and triggering short squeezes on professional investors who had bet against the stocks. Many of these meme stocks were unprofitable and burdened with debt, and the significant short interest in these companies further contributed to the sharp increase in their share prices.
Short interest for MEME ETF
(Source: Bloomberg)
- FOMO hand-in-hand with social media. Retail investors are once again using internet forums to drive significant gains in struggling company stocks. One recent example is trucking company Yellow, whose shares surged after news of a potential deal with private equity firm Apollo Global Management to provide new capital following the company’s shutdown and bankruptcy filing. Tupperware’s stock also experienced a similar MEME rally, rising about 700% in the past two weeks, despite no major company changes. Other companies like Bed Bath & Beyond, GameStop, and AMC have also previously witnessed extreme volatility due to such meme-driven rallies.
(Source: Bloomberg)
| Fund Name (Ticker) | iShares Russell 2000 ETF (IWM US) |
| Description | The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities. |
| Asset Class | Equity |
| 30-Day Average Volume (as of 31 July) | 26,288,537 |
| Net Assets of Fund (as of 1 August) | USD$57,051,862,145 |
| 12-Month Trailing Yield (as of 30 June) | 1.51% |
| P/E Ratio (as of 31 July) | 11.57 |
| P/B Ratio (as of 31July) | 1.93 |
| Management Fees | 0.19% |
Top 10 Holdings
(as of 2 August 2023)
- BUY Entry – 195 Target – 215 Stop Loss – 185
- Expectations of the end of rate hikes. The market expects interest rates to have peaked and the Federal Reserves is unlikely to hike rates any further, based on the recent slowdown in inflation and the expectation that economic growth will moderate in the coming months. Rate cuts are expected to come at the start of 2024. This is likely to improve business confidence for small cap stocks and drive growth for the segment. As small-cap companies are often more sensitive to changes in interest rates than large-cap companies, the expected decline in interest rates could potential provide a boost to their earnings.
- A lagging play. With the 3 main indices (S&P 500, Nasdaq Composite, Dow Jones Industrial Average) reaching 52-week highs recently, small capitalization companies are poised for growth as well, behind the larger cap companies as investors gain more confidence in the stock market.
- Inflow of funds into smaller cap stocks. Recently, there was a higher volume of fund flow into smaller cap stocks, as investors shift their funds from larger cap stocks to smaller cap stocks. Just last week, IWM saw an approximate $198.7 million dollar inflow, a 0.3% increase week over week in outstanding units. This shows that the market is feeling more positive towards smaller cap companies and expects growth for these companies in the future.
(Source: Bloomberg)
