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This Robot Trader Sold Moderna Stock. What It Bought Instead.

AMOM and fintech Qraft’s other ETFs have holdings picked by artificial intelligence.

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An exchange-traded fund with holdings picked by artificial intelligence made big bets on Tesla, Netflix and a very low-key stock this month—while selling Moderna as it upped its stake in Merck.

AI-driven investor Qraft, a South Korean fintech with around $60 million in assets across four ETFs, scooped up some under-the-radar stocks across software, medical devices, and cybersecurity as it adjusted its holdings at the beginning of December.

Its Large Cap Momentum ETF (ticker: AMOM) bought up enough Tesla (TSLA) stock to make it the fund’s largest holding in December with a portfolio weight of 7.7%.

“Growth is expected to continue with deliveries up 70% from Q3 of 2020, even with the global semiconductor shortage,” said Francis Geeseok Oh, a managing director at Qraft and the head of its Asian-Pacific business. 

“Tesla has been able to weather the crisis and even increase deliveries by rewriting software to be more flexible on the type of semiconductor used, allowing Tesla cars to utilize different types of semiconductors,” Oh added.

AMOM has a history of correctly anticipating price moves in Tesla stock. The fund sold off all of its shares in Tesla at the end of August 2020, before the stock fell 14% that September and a further 10% in October. 

But AMOM bought that dip, reinvesting in Tesla in November 2020. It loaded up on shares until the end of January 2021, when Tesla was then at an all-time high, before selling out before the stock dropped nearly 23% between the beginning of February and May—when AMOM bought again.

Another big bet from AMOM in December was Netflix (NFLX), which was added to the fund and now makes up 6.8% of the robot trader’s portfolio. 

The fourth-biggest new addition to the ETF this month was a very low-key pick: medical device-maker DexCom (DXCM), which specializes in glucose monitoring systems for diabetics.

The third and fifth-largest new additions to the ETF in December were industry software group Autodesk (ADSK) and cybersecurity specialist Fortinet (FTNT). These stocks and DexCom each have between 2% and 3% portfolio weight.

A significant removal from the fund was Moderna (MRNA), one of the leading Covid-19 vaccine makers, which has seen its stock slump almost 15% since the beginning of December, but remains up some 170% this year. AMOM sold off Moderna, which was previously 5.2% of its portfolio, as it increased its stake in Merck (MRK), which has developed a pill to treat Covid-19.

Merck stock, too, has been under pressure recently, declining 12% across the past month. But the robot trader thinks it will turn around: Merck is now the third-largest holding in its portfolio, with 5.1% weight, after not cracking the top 10 in October or November.

“As vaccination rates have started to plateau and with many people unwilling to take booster shots—Merck is expected to benefit from the rise of variants such as Omicron and the decaying rate of vaccine efficacy,” Oh said of AMOM’s pick.

AMOM has been listed in New York since May 2019 and holds 50 large-cap U.S. stocks, picked and rebalanced each month using artificial intelligence focusing on a momentum investing strategy.

The past month has been unkind to AMOM, which has consistently outperformed its benchmark—the S&P 500 Momentum Index—through 2020 and 2021. As of last month, AMOM had returned 27.3% in price to the S&P Momentum Index’s 24.5% over the past year. But its returns since the beginning of this quarter now stand at 4.4% loss, compared with a 7.5% gain for its benchmark.

Qraft’s other AI-picked ETFs are focused on U.S. large-caps broadly ( QRFT
), as well as value stocks ( NVQ
) and high-dividend stocks ( HDIV

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, though some experts caution that AI-run funds won’t “crack” the code of the stock market.

The entrance of AI-run funds onto Wall Street promised a new high-tech future for investing, though it hasn’t quite lived up to the hype yet.

Write to Jack Denton at [email protected]

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