An artificial intelligence-driven exchange-traded fund correctly predicted Tesla’s price movements and recently shared its most recent portfolio additions and subtractions with MarketWatch.
The fund is the Qraft AI-Enhanced US Large Cap Momentum ETF, traded under the name AMOM AMOM,
on the New York Stock Exchange since May 2019. The ETF has generated total returns of 9% so far in 2021 and 79% last year, well outperforming its benchmark, the S&P 500 Momentum ETF SPMO,
which has reported a comparable rate of 45% since April 2020.
AMOM is an actively managed, artificial intelligence-based portfolio that tracks 50 large-cap US stocks and reweighting its holdings each month. It is based on a dynamic strategy, with the AI ââbehind its stock selections capitalizing on movements in existing market trends to inform the decision to add, remove or reweight positions. Artificial intelligence scans the market and uses its predictive power to analyze a wide range of patterns that show the momentum of the stock market.
The fund is a product of Qraft, a Seoul, South Korea-based fintech group that leverages AI in its investment products, which include three other versions of major indices selected by AI: a QRFT US Large Cap Index,
an HDIV US large-cap dividend index,
and an American NVQ value index,
One of AMOM’s landmark achievements has been to correctly anticipate the TSLA price movements of electric vehicle maker Tesla,
Stock. The fund sold all of its shares in Tesla at the end of August, before the stock fell 14% in September and another 10% in October. AMOM bought that drop, reinvesting in Tesla in November and loaded up stocks until the end of January, when Tesla represented 6.7% of its portfolio.
Before the start of February, AMOM sold all of its holdings in Tesla, with the stock nearing its all-time high. Shares of the EV company have fallen more than 12% since early February, when the AI ââdecided to sell higher. AMOM has not yet bought Tesla.
The entry of AI-managed funds to Wall Street has promised a new high-tech future for investing, although it has yet to live up to the hype. Theoretically, researchers have shown that AI investing strategies can beat the market by up to 40% on an annualized basis, when tested against historical data.
But Vasant Dhar, a professor at the Stern School of Business at New York University and founder of a machine-learning-based hedge fund, argued on MarketWatch in June 2020 that AI-managed funds don’t ” would not break the stock market.
Dhar said it was difficult for funds backed by machine learning to maintain a lasting advantage in markets, which are “high-conflict” in nature. He advised investors considering investing in an AI system to ask tough questions, including how likely the AI ââ’advantage’ will persist in the future, and what are the inherent uncertainties and consequences. range of performance results for the fund.
AMOM’s best actions for the month of April
The AI ââwho heads AMOM made recommendations to reorient the fund’s portfolio at the end of March, including reweighting holdings as well as adding new stocks and opening others.
was the biggest addition, with a portfolio weighting of 2.7%. So far, shares of the retail giant have risen 3% this month, with shares rising 15% so far in 2021. AI may have picked up this action in the part of the larger rotation in value stocks, in line with its addition of another retail giant Walmart WMT,
as the fund’s second position in March, Qraft said. Walmart shares have risen more than 7% since it was added to AMOM last month.
was another addition to the fund, with the portfolio weighting just below Target’s at 2.69%. Shares of the cloud-computing software company have already climbed nearly 10% so far this month, in a rebound that takes the stock to 4% this year.
On the heels of Service Now in terms of wallet weight is Autodesk ADSK,
representing 2.16% of AMOM’s portfolio. Shares of the maker of software and design tools, including AutoCAD, are up more than 6% year-to-date and below zero for the year. MNST Monster Drink,
was another choice for April, included in AMOM with a portfolio weighting just below 2%. The energy drink company’s stock is up 5% in April and nearly 6% in 2021.
The final stock of the first five added to AMOM for April was another valuable variety: O’Reilly Auto Parts ORLY,
with an allowance of 1.8%. Shares of the parts retailer are trading just 1% higher since the start of the month, up 13% since the start of the year – so there could be more gains the rest of the month if the AI is right.
5 stocks AI doesn’t like
But AMOM also abandoned its actions in early April, including eliminating two big blue-chip names with heavy weightings in the portfolio. Manufacturer of graphics chips Nvidia NVDA,
and home improvement retailer The Home Depot HD,
each previously constituting more than 5% of the AMOM, were abolished at the beginning of the month.
The next three stocks in terms of portfolio weighting withdrawn from the fund were semiconductor system provider KLA Corporation KLAC,
barcode and IT monitoring Zebra Technologies ZBRA group,
and the manufacturer of emergency generators Generac Holdings GNRC,
So far, those five stocks are actually up in April, with Nvidia having risen more than 17% since the end of March. But if AMOM is right, maybe there will be a fix ahead.