In Consumers We Trust: 3 Leveraged ETFs That Surged In April

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

It may be an understatement to say that the economic environment of 2020 has created a lot of new and challenging realities to process. As a result of the ongoing global pandemic, traders have had to adapt to a collapsing energy market, a fractured global supply chain and, of course, waves of economic shutdowns that have affected all areas of the global economy to some degree.

Here in the U.S., many Americans who were still recovering from the 2008 recession have been dealt another blow. While this reality is no doubt alarming, particularly since much of the stock market’s growth over the past few years was attributed to a strengthening consumer, the market has seemingly decided to place its faith in the consumer making a comeback.

Evidence of this can be seen in the performance of exchange-traded funds that track retail and consumer goods sectors, a variety of which have thrived over the past several weeks. Below are just a few of the top-performing ETFs from among the leveraged funds put out by Direxion.

Direxion Daily Dow Jones Internet Bull 3X Shares (WEBL)

Intuitively, in the age of social distancing, consumers have flocked to online storefronts and virtual exchange platforms. The Direxion Daily Dow Jones Internet Bull 3X Shares WEBL, which tracks the Dow Jones Internet Composite Index, gained about 95% over the course of April, largely on the back of some of the segments’ best-performing stocks.

This includes e-commerce names like Amazon.com, Inc. AMZN, which was at new all-time highs prior to its earnings report, eBay, Inc. EBAY, higher by 36% in April, and Etsy, Inc. ETSY, up 95% in April.

But the trend of buying consumer confidence has extended beyond digital storefronts and includes stocks with business models geared toward supporting the digitization of commerce. Stocks like CRM companies like DocuSign, Inc. DOCU, higher by 30% in April, and HubSpot, Inc. HUBS, up almost 50% over the month, have also helped boost the Dow Jones index and WEBL to their current levels.

Direxion Daily Consumer Discretionary Bull 3X Shares (WANT)

Although the pandemic has undoubtedly caused pain in the finances of everyday consumers, the consumer discretionary sector maintained an unexpectedly strong surge in April. This is evidenced by the nearly 100% growth seen by the Direxion Daily Consumer Discretionary Bull 3X Shares WANT, which aims to deliver three-times the daily performance of the S&P’s the Consumer Discretionary Select Sector Index.

Components leading the index include a number of companies with heavy exposure to manufacturing like Genuine Parts Company GPC and Whirlpool Corporation WHR, which have both gained more than 35% over the month. Homebuilders have shown similar resilience in the start of the second quarter, with major actors like Lennar Corporation LEN and D.R. Horton, Inc. DHI gaining more than 45% in the month.

Direxion Daily Retail Bull 3X Shares (RETL)

Although a traditionally fraught industry, retail has experienced one of the strongest comebacks of any segment of the market. In just one month, the Direxion Daily Retail Bull 3X Shares RETL posted a 126% gain, with the underlying S&P Retail Select Industry Index adding more than 1,000 points to its total return.

As mentioned, the strength in online retail is one aspect of this. Some physical storefronts with a strong online presence, like Best Buy Co., Inc. BBY and Walmart Inc. WMT can also be counted among this contingent.

Nevertheless, more heavily brick-and-mortar outfits also managed to put up a comparable showing over the course of April despite many storefronts being limited in their business or shuttered entirely. Companies with a high reliance on same-store sales like Big Lots, Inc. BIG Five Below, Inc. FIVE and Penske Automotive Group, Inc. PAG all ended the month higher by anywhere from 40-70%.

Whether or not these trends will extend past the depths of the pandemic as the economy cautiously attempts to regain some semblance of normalcy is another question entirely. However, at the moment, investors seem eager to put their faith that the consumer hasn’t lost the same magic that helped bolster the economy to its prior stability.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. 

For the funds’ standardized and most recent month end performance click here (www.direxion.com/etfs)

These leveraged ETFs seek investment results that are 300% of the return of its benchmark index for a single day. Investing in a Direxion Shares ETF may be more volatile than investing in broadly diversified funds. The use of leverage by an ETF increases the risk to the ETF. The Direxion Shares ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged investment results and intend to actively monitor and manage their investment.

WEBL as of 3/31/2020. Source: direxion.com.

WANT as of 3/31/2020. Source: direxion.com.

RETL as of 3/31/2020. Source: direxion.com.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-301-9214 or visit our website at direxioninvestments.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Market Disruptions Resulting from COVID-19. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Funds.

Shares of the Direxion Shares are bought and sold at market price (not NAV) and are not individually redeemed from a Fund. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally calculated) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense reimbursements or recoupments and fee waivers in effect during certain periods shown. Absent these reimbursements or recoupments and fee waivers, results would have been less favorable.

Direxion Shares Risks: An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from an ETF’s investments in a particular industry or sector which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The ETFs do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index for periods other than a single day. For other risks including leverage, correlation, daily compounding, market volatility and risks specific to an industry or sector, please read the prospectus.
Distributor: Foreside Fund Services, LLC.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.