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Single-Stock ETFs Beating the Market on Big "Mag 7" Wave
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Single-stock ETFs have been gaining immense popularity over the past year amid the stock market surge and the big tech wave. Unlike traditional ETFs, which typically track a broad index or sector, single-stock ETFs provide exposure to the performance of one specific company by using derivatives. This allows investors to gain exposure to a particular stock without having to buy the stock directly.
Single-stock ETFs tap the gambling mindset that exists in markets. There are currently four dozen single-stock ETFs on the market with a combined $3.5 billion in assets, according to Morningstar data. Five firms, AXS, Direxion, YieldMax, GraniteShares and Innovator, provide all the single-stock ETFs currently available on the market.
We have highlighted five single-stock ETFs that have outperformed the market so far this year. The solid trend is likely to continue in the second half as well.
T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) ) – Up 449.5%
T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of NVIDIA (NVDA). It has AUM of $653.6 million and an expense ratio of 1.05%. T-REX 2X Long NVIDIA Daily Target ETF trades in an average daily volume of 951,000 shares (read: ETFs to Tap as NVIDIA Becomes the Most Valuable Company).
GraniteShares 2x Long META Daily ETF (FBL - Free Report) ) – Up 75.7%
GraniteShares 2x Long META Daily ETF tracks two times the performance of the stock of Meta Platforms (META). It has accumulated $129.2 million in its asset base and charges 1.15% in annual fees. GraniteShares 2x Long META Daily ETF trades in an average daily volume of 629,000 shares.
Direxion Daily GOOGL Bull 2X Shares tracks two times the performance of the Class A shares of Alphabet (GOOGL), charging 95 bps in annual fees. It trades in a volume of 187,000 shares a day on average and has accumulated assets worth $106.2 million.
Direxion Daily AMZN Bull 2X Shares ETF tracks two times the performance of the shares of Amazon (AMZN), charging 95 bps in annual fees. It trades in a volume of 443,000 shares a day on average and has accumulated assets worth $203.1 million.
GraniteShares 2X Long COIN Daily ETF (CONL - Free Report) ) – Up 37.1%
GraniteShares 2x Long COIN Daily ETF seeks two times (200%) the daily percentage change of the common stock of Coinbase Global (COIN). It has accumulated $503.1 million in its asset base while trading in an average daily volume of 2.3 million shares. GraniteShares 1.5x Long COIN Daily ETF charges 1.15% in annual fees.
More Gains Ahead?
These best-performing ETFs are the leveraged plays on the so-called "Magnificent Seven" stocks. The "Magnificent Seven" is the biggest growth engine for the overall stock market. About 60% of the gains in the first half were driven by the “mega-cap” tech companies — NVIDIA, Microsoft (MSFT), Amazon, Meta Platforms and Apple (AAPL). NVIDIA alone accounted for 31% of the market’s first-half advance.
With the latest surge, NVIDIA, Apple and Microsoft are in the race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities. This technology-driven momentum is expected to continue at least through the summer (read: Tech Sector Dominates First-Half Rally: 5 Best ETFs).
The expansion of AI applications holds the promise of ushering in fresh opportunities for growth in 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.
Further, these stocks have superior fundamentals with faster growth rates, higher profit margins, cleaner balance sheets and reasonable valuations.
For CONL, the prospect also looks bright. Though Bitcoin price dropped in recent months, investors’ interest in the mining sector surged following Core Scientific's (CORZ) deal with AI company CoreWeave in early June. Core Scientific signed a 200 megawatts (MW) artificial intelligence deal with the cloud computing firm, triggering a rally in the bitcoin mining sector (read: Is a $500K Bitcoin Rally Possible? Crypto ETFs to Consider).
Downsides
While single-stock ETFs offer a focused way to invest in a company, they come with significant risks due to their lack of diversification and exposure to the volatility of a single stock. They are typically more suited for experienced investors who understand and are willing to accept these risks. Here is the risk associated 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, as they are invested entirely in one 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 typically lower than mutual funds, ETFs still come with management fees, which can eat into your investment returns over time, especially in a narrowly focused fund like a single-stock ETF.
Image: Bigstock
Single-Stock ETFs Beating the Market on Big "Mag 7" Wave
Single-stock ETFs have been gaining immense popularity over the past year amid the stock market surge and the big tech wave. Unlike traditional ETFs, which typically track a broad index or sector, single-stock ETFs provide exposure to the performance of one specific company by using derivatives. This allows investors to gain exposure to a particular stock without having to buy the stock directly.
Single-stock ETFs tap the gambling mindset that exists in markets. There are currently four dozen single-stock ETFs on the market with a combined $3.5 billion in assets, according to Morningstar data. Five firms, AXS, Direxion, YieldMax, GraniteShares and Innovator, provide all the single-stock ETFs currently available on the market.
We have highlighted five single-stock ETFs that have outperformed the market so far this year. The solid trend is likely to continue in the second half as well.
T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) ) – Up 449.5%
T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of NVIDIA (NVDA). It has AUM of $653.6 million and an expense ratio of 1.05%. T-REX 2X Long NVIDIA Daily Target ETF trades in an average daily volume of 951,000 shares (read: ETFs to Tap as NVIDIA Becomes the Most Valuable Company).
GraniteShares 2x Long META Daily ETF (FBL - Free Report) ) – Up 75.7%
GraniteShares 2x Long META Daily ETF tracks two times the performance of the stock of Meta Platforms (META). It has accumulated $129.2 million in its asset base and charges 1.15% in annual fees. GraniteShares 2x Long META Daily ETF trades in an average daily volume of 629,000 shares.
Direxion Daily GOOGL Bull 2X Shares (GGLL - Free Report) ) – Up 56.4%
Direxion Daily GOOGL Bull 2X Shares tracks two times the performance of the Class A shares of Alphabet (GOOGL), charging 95 bps in annual fees. It trades in a volume of 187,000 shares a day on average and has accumulated assets worth $106.2 million.
Direxion Daily AMZN Bull 2X Shares ETF (AMZU - Free Report) ) – Up 44.8%
Direxion Daily AMZN Bull 2X Shares ETF tracks two times the performance of the shares of Amazon (AMZN), charging 95 bps in annual fees. It trades in a volume of 443,000 shares a day on average and has accumulated assets worth $203.1 million.
GraniteShares 2X Long COIN Daily ETF (CONL - Free Report) ) – Up 37.1%
GraniteShares 2x Long COIN Daily ETF seeks two times (200%) the daily percentage change of the common stock of Coinbase Global (COIN). It has accumulated $503.1 million in its asset base while trading in an average daily volume of 2.3 million shares. GraniteShares 1.5x Long COIN Daily ETF charges 1.15% in annual fees.
More Gains Ahead?
These best-performing ETFs are the leveraged plays on the so-called "Magnificent Seven" stocks. The "Magnificent Seven" is the biggest growth engine for the overall stock market. About 60% of the gains in the first half were driven by the “mega-cap” tech companies — NVIDIA, Microsoft (MSFT), Amazon, Meta Platforms and Apple (AAPL). NVIDIA alone accounted for 31% of the market’s first-half advance.
With the latest surge, NVIDIA, Apple and Microsoft are in the race to become the world’s most valuable company and hit a market capitalization of $4 trillion on surging enthusiasm over AI capabilities. This technology-driven momentum is expected to continue at least through the summer (read: Tech Sector Dominates First-Half Rally: 5 Best ETFs).
The expansion of AI applications holds the promise of ushering in fresh opportunities for growth in 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.
Further, these stocks have superior fundamentals with faster growth rates, higher profit margins, cleaner balance sheets and reasonable valuations.
For CONL, the prospect also looks bright. Though Bitcoin price dropped in recent months, investors’ interest in the mining sector surged following Core Scientific's (CORZ) deal with AI company CoreWeave in early June. Core Scientific signed a 200 megawatts (MW) artificial intelligence deal with the cloud computing firm, triggering a rally in the bitcoin mining sector (read: Is a $500K Bitcoin Rally Possible? Crypto ETFs to Consider).
Downsides
While single-stock ETFs offer a focused way to invest in a company, they come with significant risks due to their lack of diversification and exposure to the volatility of a single stock. They are typically more suited for 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: Tap 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, as they are invested entirely in one 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 typically lower than mutual funds, ETFs still come with management fees, which can eat into your investment returns over time, especially in a narrowly focused fund like a single-stock ETF.