Hillary Clinton Loves This Biotech ETF

Alright, we do not know for certain if Democratic presidential candidate and former Secretary of State Hillary Clinton is long the about-to-be-mentioned exchange traded fund, or any ETF for that matter. What the investment community does know is that Clinton's Monday tweet about pharmaceuticals price gouging gave traders an excuse to punish biotechnology stocks and ETFs.

 

By the time the closing bell rang Monday, the Direxion Daily S&P Biotech Bear 3X Shares LABD was one of the day's top-performing ETFs on a percentage basis, finishing higher by 16 percent. That was enough to make LABD, still in its infancy following its May debut, one of the day's top-performing ETFs of any stripe. LABD and its bullish relative, the Direxion Daily S&P Biotech Bull 3X Shares LABU, were the first triple-leveraged biotech ETFs to come to market.

 

Predictably, LABU has been the more prolific asset gatherer of the pair as is usually the case with bullish and bearish leveraged ETF pairs. As of Sept. 21, LABU had hauled in $123.6 million in assets since coming to market, making it one of the more successful ETFs to debut in 2015.

 

LABD was easily the best-performing ETF in Direxion's leveraged stable yesterday after seven new units of the fund were created, resulting in inflows of $12.6 million and LABD's biggest volume day since its May debut. Importantly, at least for those traders that are long LABD, the ETF is following through on Monday's bullish action.

 

At this writing, LAD is higher by nearly 11 percent, making it the top-performing ETF on a percentage basis today. Turnover in LABD is already close to double the daily average and appears poised to eclipse Monday's volume. Said differently, like it or not, biotech investors are expressing skittishness over Clinton's comments.

 

LABD attempts to deliver three times the daily inverse performance of the S&P Biotechnology Select Industry Index, the same benchmark tracked by the SPDR S&P Biotech ETF XBI. The equal-weight XBI is the third-largest biotech ETF by assets.

 

LABD deserves credit on another front: It is not, at least not yet, deviating wildly from three times the inverse performance of S&P Biotechnology Select Industry Index. LABD's 30-day variance versus triple the underlying index's returns is just 0.53 percent as of Sept. 21, according to Direxion data. That is a scant variance when considering some triple-leveraged ETFs have overshot their indexes by more than 21 percent over that period. 

 

 

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