An exchange-traded fund that uses artificial intelligence in identifying the most promising US equities has blasted past the S&P 500 in returns for the past month — without any meme stocks in its holdings, analysis by DataTrek showed.
The AIEQ ETF's performance for the past month has been especially strong, and as of Monday, the 1-month return for the fund was 10.6%, compared with 2% for the S&P 500. The 1-year return was 50.1%, while it was 39.9% for the index, DataTrek found.
Year-to-date, though, the two are much closer, at 13.6% for the ETF and 13.3% for the US equity index. And while the AIEQ has been logging a solid performance overall, its 3-month return was 0.5%, much lower than the S&P 500's 7.2%.
The ETF regained strength and caught up with the index over the last month. It did this by adding companies with better performances to its holdings, DataTrek said. "In that respect, AIEQ's process looks a lot like a human manager, searching for momentum names that fit its investment process." the financial research firm said.
Despite this, DataTrek analysis showed the ETF was free of meme stocks, which can rise and fall in quick succession, significantly and quickly impacting returns.
Meme stocks such as GameStop and AMC have sent rumbles through the market in recent months, after retail investors banded together to buy the shares, driving prices up and causing short squeezes. As this caused stocks to be overvalued, those who invested at the highs or during the run-up were left vulnerable to big losses in the longer term.
Instead, AIEQ shifted its top 10 holdings. It kept Alphabet, 10X Genomics, Costar Group, Tesla and Square in the mix, albeit with weighting adjustments, and added MongoDB, DexCom, Appian, Carvana and Autozone. DocuSign and Yeti Holdings were among the stocks moved out of the top 10.
The fund also spread out its investments further. Its top 10 holdings now account for 28% of the portfolio, versus 40% previously, in an effort to catch the momentum of a wider range of stocks, DataTrek said. It currently manages assets worth $155.6 million and trades on the NYSE ARCA exchange.
AIEQ is powered by IBM's Watson supercomputing, which enables the actively-managed ETF to use artificial intelligence when picking stocks. It analyzes company, technical, macro and market data from news, social media, industry analysis, and financial statements, according to its profile on the website of the ETF Managers Trust, which runs the fund.