A listed artificial intelligence fund started Tesla and Amazon from its portfolio in June and chose instead to load shares in companies including Qualcomm, Snap and GameStop.
Qraft AI-Enhanced US Large Cap Momentum ETF traded as AMOM AMOM
on the New York Stock Exchange removed major technology companies from its portfolio this month as it shifted to favoring retailers and other post-pandemic trades.
Electric car manufacturer Tesla TSLA
and online retailer Amazon AMZN
represented two of the fund’s three largest holdings in May, but was completely removed in the latest rebalancing on June 2, along with graphics microchip maker Nvidia NVDA,
which was its sixth largest company. The artificial intelligence program that controls the fund believes these stocks will see price declines in the coming month.
The highlight among the stocks added in June was the GameStop GME,
the video game retailer that incorporates the “meme stock”
This was when a bunch of investors, largely organized on the social media platform Reddit, helped push hedge fund short positions vis-à-vis companies, including GameStop, the cinema chain AMC AMC,
and the technology group BlackBerry BB
earlier this year. The trading water caused multi-billion losses for hedge funds, incredible gains for individuals who timed it right, and ushered in a new era of Internet-inspired trading.
GameStops stock price rose nearly 10 times from January 15 to January 27 from $ 35 per share. Stock for almost $ 350. The stock is currently trading around $ 300 and makes up about 1% of AMOM. And now AI, calling the shots, believes it will move even higher in June, and the stock has already gained more than 6% since the stock was added to the fund for the first time.
Also read: Early Tesla backer and top fund manager attacks Warren Buffett’s strategy. Here is his investment advice.
“Few fund managers would take the risk of adding a meme stock to their portfolios, but Qraft’s AI model has no such prejudice,” said Geeseok Oh, a CEO of Qraft and head of its Asia-Pacific business.
The five largest stocks by portfolio weight added to AMOM in June include the semiconductor group Qualcomm QCOM,
Big Tobacco Company Philip Morris PM,
social media player Snap SNAP,
medical technology specialists Edwards Lifesciences EW,
and orthodontic group Align Technology ALGN.
After the fund was reweighed, AMOM’s five largest holdings by portfolio weight were tech giant Facebook FB,
dealers Walmart WMT
and Home Depot HD,
the software company Adobe ADBE,
and semiconductor manufacturing company Texas Instruments TXN.
“This month, it looks like AMOM’s portfolio is shifting towards post-pandemic trading, a little more diversified by a portfolio from the previous month’s big technology-heavy strategy,” said Oh.
AMOM’s decision to remove Tesla from its portfolio came after a bullish bet could not pay off. The fund bought about $ 1.4 million in shares of the electric car company in May after avoiding the stock for several months, and shares in Tesla fell 7% before AI removed it from the fund. This mistake with Tesla was a rare occurrence for the robot controlling AMOM, which otherwise has a strong record for predicting movements in the company’s stock price.
Plus: Do not ignore these 3 changes to investment highlighted by GameStop, BlackBerry and AMC, says top economist
AMOM has been listed in New York since May 2019 and has delivered a total return of 11% so far in 2021 and 53% in the past year – exceeding its benchmark, the S&P 500 Momentum Index, which has risen by a comparable 26% in the last year.
AMOM is an actively managed portfolio powered by artificial intelligence that tracks 50 US stocks with large cap and reconsiders its holdings each month. It is based on a momentum strategy where the AI behind its stock choices leverages the movements of existing market trends to inform the decision to add, remove or shortcut holdings. The artificial intelligence scans the market and uses its predictable ability to analyze a broad set of patterns that show the stock market momentum.
The fund is a product of Qraft, a fintech group in Seoul, South Korea that leverages AI across its investment products, which includes three other AI-selected versions of major indices: a US big cap index QRFT
; a major US dividend index HDIV
; and a US value index NVQ.
The entry of AI-powered funds into Wall Street promised a new high-tech future for investment, though it has not yet lived up to the hype. Theoretically, researchers have shown that AI investment strategies can beat the market by up to 40% on an annual basis when tested against historical data.
But Vasant Dhar, a professor at New York University’s Stern School of Business and founder of machine learning-based hedge fund SCT Capital Management, argued on MarketWatch in June 2020 that AI-powered funds do not “crack” the stock market code.
Due to prudence, Dhar said it was difficult for machine-supported funds to maintain a sustainable advantage over markets that have “a non-stationary and adversarial nature.” He advised investors considering an AI system to ask tough questions, including how likely it is that AI’s “edge” will continue into the future, and what the inherent uncertainties and range of performance results for the fund are.