The following news item is an excerpt from an Investment News Article dated August 18, 2022.
“Massachusetts Secretary of the Commonwealth William Galvin announced a ‘sweep’ of firms offering
the new ETFs, which he compared to gambling at a casino.
With thehttps://www.investmentnews.com/single-stock-etf-craze-leads-to-single-treasury-bond-exposure-225160
first single-stock ETFs only about a month old and the pipeline for new offerings suggesting dozens more
will be receiving approval from the Securities and Exchange Commission, Galvin’s office is seeking to
protect “Main Street investors” from harm by initiating a “sweep of complex single stock exchange traded
fund offerings recently made public and offered through Massachusetts registered broker-dealers.”
“These are risky products, investing in only one stock, with no diversity cushion whatsoever,” Galvin said
in a prepared statement.
“For nearly all Main Street investors, there is no difference between investing your money in single-stock
ETFs and gambling with that money at a casino,” he added. “Under no circumstances should an investor
use these products as a long-term investment.””
Most in the ETF community consider this step to be an overreaction and political grandstanding.
Nevertheless, almost all in the professional community wish to want investors that these tools are for
short-term traders only and should not be held by long-term investors.
The first wave of leverage ETFs was launched by AXS Investments in early October:
AXS TSLA Bear Daily ETF (Nasdaq: TSLQ);
AXS 1.25X NVDA Bear Daily ETF (Nasdaq: NVDS);
AXS 1.5X PYPL Bear Daily ETF (PYPS);
AXS 1.5X PYPL Bull Daily ETF (PYPT);
AXS 2X NKE Bear Daily ETF (NKEQ);
AXS 2X NKE Bull Daily ETF (NKEL);
AXS 2X PFE Bear Daily ETF (PFES); and
AXS 2X PFE Bull Daily ETF (PFEL).
Shortly thereafter, GraniteShares and Direxion Shares came out with the following:
GraniteShares 1.25x Long TSLA Daily ETF (SL)
GraniteShares 1x Short TSLA Daily ETF (TSLI)
GraniteShares 1.75x Long AAPL Daily ETF (AAPB)
GraniteShares 1.5x Long COIN Daily ETF (CONL)
Direxion Daily AAPL Bear 1X Shares (AAPD)
Direxion Daily AAPL Bull 1.5X Shares (AAPU)
Direxion Daily TSLA Bear 1X Shares (TSLS)
Direxion Daily TSLA Bull 1.5X Shares (TSLL)
The single-stock ETFs from AXS and GraniteShares charge an expense ratio of 1.15%, while the Direxion funds carry a fee of 0.95%
There are a number of additional filings out there but as of this writing, these 16 constituted the selection
set in the US. However, only seven different stocks are covered: Apple (AAPL); Coinbase (COIN); Nike
(NKE); Nvidia (NVDA); PayPal (PYPL); and Tesla (TSLA). While ValuEngine does not rate these new
trading vehicles, each stock is covered with a comprehensive report.
The following table compares them from a top-level perspective. All data are as of August 28, 2022.
| AAPL | COIN | NKE | NVDA | PFE | PYPL | TSLA | |
| Stock | Apple | Coinbase | Nike | Nvidia | Pfizer | Paypal | Tesla |
| ValuEngine Rating | 3 | 1 | 3 | 3 | 3 | 2 | 5 |
| VE Forecast 1-mo. Price Return | -0.3% | -1.1% | -0.1% | -0.2% | 0.3% | -0.9% | 2.5% |
| VE Forecast 3-mo. Price Return | 3.6% | 0.4% | 2.8% | 3.9% | 0.1% | -0.1% | 2.4% |
| VE Forecast 1-Yr. Return | -3.8% | -12.6% | -1.2% | -1.9% | 3.5% | -10.3% | 31.6% |
| Historic 1 mo. Price Return | 16.2% | 35.3% | 6.6% | 8.8% | -11.6% | 29.8% | -58.2% |
| Historic 3 mo. Price Return | 7.9% | -11.9% | -7.0% | -16.0% | -14.3% | 8.7% | -62.5% |
| Historic 6 mo. Price Return | -2.3% | -65.2% | -21.0% | -35.2% | -1.5% | -17.2% | -67.3% |
| Historic 1-Yr. Price Return | 5.4% | -74.7% | -35.8% | -30.4% | -1.1% | -67.9% | -61.0% |
| Historic 5-Yr Ann. Price Return | 29.5% | -124.3% | 13.3% | 30.0% | 8.4% | 7.8% | 52.5% |
| Volatility | 30.6% | 88.8% | 26.0% | 47.2% | 24.3% | 39.8% | 63.1% |
| Sharpe Ratio | 0.96 | -1.40 | 0.51 | 0.63 | 0.35 | 0.20 | 0.83 |
| Beta | 1.20 | 3.86 | 1.02 | 1.70 | 0.61 | 1.48 | 1.00 |
| Div. Yield | 0.6% | 0.0% | 1.1% | 0.1% | 3.5% | 0.0% | 0.0% |
| Earnings Growth | 4.0% | -70.1% | 7.4% | -4.1% | -4.0% | 9.0% | 50.2% |
| Trailing P/E Ratio | 26.6 | Neg. Earnings | 29.9 | 43.3 | 7.5 | 31.5 | 98.1 |
| P/S Ratio | 6.7 | 2.5 | 3.6 | 13.3 | 2.6 | 4.1 | 13.3 |
| Valuation Decile | 9th | 10th | 6th | 10th | 3rd | 2nd | 2nd |
| Earnings Surprise Decile | 5th | 10th | 3rd | 5th | 3rd | 5th | 2nd |
Observations
- Tesla gets ValuEngine’s highest rating of 5 for 6-to-12-month year-ahead performance. Tesla also
comes up strong on the model’s valuation decile despite high traditional valuation ratios due to high
earnings growth rate vs. mammoth relative price decline. Coinbase gets the lowest rating of 1. - Coinbase is the most volatile stock by far with an annualized volatility of 89% and a Beta of 3.86 which
is almost unheard of. Pfizer is the least volatile stock with a very low Beta. It is undervalued by most
metrics but only rated as average on both timeliness of investment and valuation by ValuEngine. - Apple has the best historic Sharpe ratio but is a relatively neutral investment now according to our
models.