Meme-stock ETF is back from the dead. Last time, its launch coincided with the 2021 market top.
By Joseph Adinolfi and James RogersThe ETF's biggest holding is Opendoor, a name that has sparked comparisons with the meme-stock explosion of 2021The resurrected meme-stock ETF began trading on Wednesday, with Opendoor Technologies as its biggest holding.Roundhill Investments has resurrected an exchange-traded fund focused on holding a basket of so-called meme stocks nearly two years after shutting down the original.The Roundhill Meme Stock ETF MEME started trading on Wednesday, under the same name and ticker it used during its original iteration. The firm liquidated an earlier version of the fund at the end of 2023, as MarketWatch reported at the time.Uptake has been decent so far. Dave Mazza, CEO of Roundhill Investments, which launched the fund, told MarketWatch that $9 million worth of the funds' shares had already changed hands by 3 p.m. Eastern. That's not bad for an ETF focused on a single theme - in this case meme stocks, he said.But some are wondering whether the fund's rebirth could be a sign that a stock-market top is near.Jonathan Krinsky, a technical strategist at BTIG, was among the analysts highlighting some troubling historical parallels. In commentary shared with MarketWatch, he pointed out that the original meme-stock craze had already crested by the time the original MEME ETF had launched in December 2021. But the fund's creation did coincide nearly perfectly with a 2021 top in the Nasdaq-100 NDX. By the end of January 2022, a painful bear market that saw the S&P 500 SPX tally its worst calendar-year performance since the 2008 financial crisis had already begun."History doesn't repeat, but it often rhymes," Krinsky said, paraphrasing a saying that has proven popular with Wall Street analysts.Many have commented that the current backdrop in the U.S. equity market bears some resemblance to the trading frenzy that saw shares of more speculative companies skyrocket in 2020 and 2021. That period gave birth to the original meme-stock craze, as investors gravitated toward social-media posts and YouTube videos published by Keith Gill, better known by his online moniker Roaring Kitty.Gill plotted out his view that shares of GameStop Corp. (GME) were seriously undervalued, due in part to Wall Street funds betting against the stock. Turns out, his argument resonated with a legion of investors who banded together to drive a monster rally in the stock in January 2021.While the name and the ticker for the MEME ETF have been left unchanged, Mazza told MarketWatch that the way the fund works has been completely overhauled.The previous iteration tracked an index that screened for stocks with high short interest and strong traction on social media. It was rebalanced twice a month. The new version is actively managed, and its holdings could be adjusted once a week, or even more frequently.The ETF will limit its holdings to a universe consisting of the most actively traded 200 stocks in the U.S. market. The manager will use stocks' implied volatility and signs of engagement on social media to pick its holdings, which will number between 13 and 25 stocks."The fund is a realization that the retail investor in aggregate, and the influence they have on markets is here to stay," Mazza said. "Commission-free trading, online communities and online access to information has made retail investors more powerful than ever.""This is a way for investors to access the potential of retail-driven stocks in a way that wasn't available before, even with the previous version of the meme ETF," he added.At its launch, the fund's largest position was in Opendoor Technologies Inc. (OPEN), a company that has been credited with reviving the meme-stock fervor among everyday investors.Noted Opendoor bull Eric Jackson has been the biggest champion of the e-commerce platform for residential real-estate transactions, relentlessly rallying retail support around what has been dubbed the "OPEN army."The fund manager told MarketWatch that, while he doesn't like the description of Opendoor as a meme stock, and views it as a cult stock, he sees the new ETF as a positive for the iBuyer. "I can't complain about more assets being allocated to buy OPEN shares through it," he said.-Joseph Adinolfi -James RogersThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.