ETFs
Single-Stock ETFs Beat Market on Big ‘Mag 7’ Wave
Single-stock ETFs have gained popularity over the past year, amid a surge in stock markets and the tech boom. Unlike traditional ETFs, which typically track a broad index or sector, single-stock ETFs provide exposure to the performance of a specific company using derivatives. This allows investors to gain exposure to a particular stock without having to buy it directly.
Single-stock ETFs are tapping into the gaming spirit that prevails in markets. There are currently four dozen single-stock ETFs on the market, with combined assets of $3.5 billion, according to Morningstar data. Five companies—AXS, Direxion, YieldMax, GraniteShares and Innovator—provide all of the single-stock ETFs currently available on the market.
We’ve highlighted five single-stock ETFs that have outperformed the market so far this year. This strong trend is expected to continue in the second half of the year as well.
ETF T-REX 2X Long NVIDIA Daily Target (NVDX) – Up 449.5%
The T-REX 2X Long NVIDIA Daily Target ETF aims to amplify (by 200%) the daily performance of NVIDIA (NVDA). It has $653.6 million in assets under management and an expense ratio of 1.05%. The T-REX 2X Long NVIDIA Daily Target ETF trades in an average daily volume of 951,000 shares (read: ETFs to Play as NVIDIA Becomes Most Valuable Company).
GraniteShares 2x Long META Daily ETF (FBL) – Up 75.7%
The GraniteShares 2x Long META Daily ETF tracks the performance of Meta Platforms (META) stock twice. It has accumulated $129.2 million in its asset base and charges 1.15% in annual fees. The GraniteShares 2x Long META Daily ETF trades in an average daily volume of 629,000 shares.
Actions Direxion Daily GOOGL Bull 2X (GGLL) – Up 56.4%
The Direxion Daily GOOGL Bull 2X shares track the performance of Alphabet’s Class A shares (GOOGL) two times, charging 95bps in annual fees. The average daily trading volume is 187,000 shares and accumulated assets are $106.2 million.
ETF Direxion Daily AMZN Bull 2X Shares (AMZU) – Up 44.8%
The Direxion Daily AMZN Bull 2X Shares ETF tracks the performance of Amazon (AMZN) stock twice, with a 95bps annual fee. It trades an average of 443,000 shares per day and has accumulated assets worth $203.1 million.
GraniteShares 2X Long COIN Daily ETF (WITH L) – Up 37.1%
The GraniteShares 2x Long COIN Daily ETF seeks to achieve two times (200%) the daily percentage change of Coinbase Global common stock (COIN). It has accumulated $503.1 million in its asset base while trading on an average daily volume of 2.3 million shares. The GraniteShares 1.5x Long COIN Daily ETF charges a 1.15% annual fee.
The story continues
More gains to come?
These top-performing ETFs are the leveraged stocks of the “Magnificent Seven.” The “Magnificent Seven” are the biggest growth driver for the stock market as a whole. About 60% of the gains in the first half of the year came from the “mega-cap” technology companies: NVIDIA, Microsoft (MSFT), Amazon, Meta Platforms and Apple (AAPL). NVIDIA alone accounted for 31% of the market’s gains in the first half of the year.
With this latest surge, NVIDIA, Apple, and Microsoft are in the race to become the world’s most valuable company and reach a $4 trillion market cap on the back of growing enthusiasm for AI capabilities. This tech-driven momentum is likely to continue through at least the summer (read: Tech Sector Leads First-Half Rally: Top 5 ETFs).
The expansion of AI applications promises to open new growth opportunities for these stocks. According to a new report by Grand View Research, the global artificial intelligence market is expected to witness a CAGR (2024-2030) of 36.6% to reach $811.75 billion by 2030.
Additionally, these stocks have superior fundamentals with faster growth rates, higher profit margins, cleaner balance sheets and reasonable valuations.
For CONL, the outlook also looks bright. While Bitcoin’s price has been falling in recent months, investor interest in the mining sector has surged following Core Scientific’s (CORZ) deal with AI company CoreWeave in early June. Core Scientific signed a 200-megawatt (MW) AI deal with the cloud computing company, sparking a surge in the Bitcoin mining sector (read: Is a $500K Bitcoin Rally Possible? Crypto ETFs to Consider).
Disadvantages
While individual stock ETFs offer a targeted way to invest in a company, they carry significant risks due to their lack of diversification and exposure to single-stock volatility. They are generally best suited to experienced investors who understand and are willing to accept these risks. Here is the risk associated with these ETFs:
High risk:If the specific company underperforms, investors could lose a substantial amount of money (read: Take Advantage of Tesla’s Better-Than-Expected Q2 Deliveries With These ETFs).
Lack of diversification: One of the key principles of risk management in investing is diversification. Single-stock ETFs go against this principle because they are entirely invested in a single company.
Market Volatility: A single stock ETF is subject to the volatility of the individual stock, which can be influenced by company-specific news and events.
Management fees: While generally lower than mutual funds, ETFs still have management fees, which can reduce your investment returns over time, especially in a narrow fund like a single-stock ETF.
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GraniteShares 2x Long COIN Daily ETF (CONL) : ETF Research Reports
Direxion Daily AMZN Bull 2X (AMZU) Actions: ETF Research Reports
Direxion Daily GOOGL Bull 2X (GGLL) Actions: ETF Research Reports
GraniteShares 2x Long META Daily ETF (FBL) : ETF Research Reports
ETF T-REX 2X Long NVIDIA Daily Target (NVDX): ETF Research Reports