Here Comes Santa Claus

Written by GSCR Staff   
Tuesday, 17 December 2013 09:03

There is a lot of talk about the Santa Claus rally at this time of year as small cap stocks tend to outperform other assets during this time frame. While we typically profile stocks, here is an out-of-the-box ETF to play this recurring trend. The Direxion Daily Small Cap Bull 3X Shares (NYSE -TNA – $69.17) is a highly leveraged and speculative investment vehicle.  It’s not something to buy and hold indefinitely.

Under normal circumstances, TNA creates long positions by investing at least 80% of its assets in the securities that make up the Russell 2000® Index and/or financial instruments that provide leveraged and unleveraged exposure to the index. The index measures the performance of the small-cap segment of the U.S. equity universe. In other words, the smallest 2000 companies in the Russell 3000® Index compose the Russell 2000® Index. Still, this subset of the 3000 accounts for only about 10% of the total market capitalization of that index. The fund is non-diversified.

TNA’s Summary Prospectus states that, “The Fund seeks daily investment results, before fees and expenses, of 300% of the performance of the Russell 2000® Index. The Fund seeks daily leveraged investment results and does not seek to achieve its stated investment objective over a period of time greater than one day. The Fund is different and much riskier than most exchange-traded funds….the Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios.”

Clearly, this fund does not employ a strategy that is your typical “buy low sell high.”  Nonetheless, for investors seeking extra juice this time of year, one could enjoy big returns if the market moves in the right “Direxion.”

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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