Since peaking on Sept. 18, the S&P 500 is now off nearly 4%. The Dow Jones Industrial Average has been only modestly better with a 3.5% decline over the same period while the NASDAQ Composite stands out, and for all the wrong reasons, with a decline of 4.4%.
Such swift downside moves remind (and tempt) investors that are times when leveraged exchange traded funds post almost outlandish returns as some of these funds have done in recent weeks.
Even with those tantalizing short-term returns any examination of leveraged ETFs must be accompanied by the reminder that these products are best suited for active, risk-tolerant traders, something that both ProShares and Direxion, the two largest issuers of leveraged of inverse and leveraged ETFs, do a good job of explaining to investors on their web sites.
Additionally, active investors should study the impact of the daily rebalancing process leveraged ETFs go through. Kid Dynamite’s World explores that topic as it pertains to the well-known Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) and the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT).
With those disclaimers in mind, let’s have a look at some leveraged ETFs that have been on a torrid pace over the past month, starting with the…
Direxion Daily Russia Bear 3x Shares (NYSEArca: RUSS)
One-month gain: 41.1%
Comment: Investors have been living dangerously with Russian equities and the corresponding U.S.-listed ETFs. As we reported last week, the Market Vectors Russia ETF (NYSEArca: RSX) dipped into bear market territory, but that did not prevent the ETF from hauling in almost $610 million in new assets over the two months ended Oct. 1. That was the ETF’s best run of asset additions since 2011, report Elena Popina and Halia Pavliva for Bloomberg.
Interestingly, money has been pulled from RUSS over the past month, but the adventurous souls that have stayed involved with the ETF have been rewarded. RUSS is almost 12% just this month. [Bear Market not Keeping Investors from Russia ETFs]
Direxion Daily Energy Bear 3X Shares (NYSEArca: ERY)
One-month gain: 32.6%
Comment: By now, most investors know that that the energy sector, after falling 9.5% during the third quarter, has gone from being one of the best-performing sectors in the S&P 500 to one of the worst. That much is clear not only because ERY, which attempts to deliver three times the daily inverse performance of the Standard and Poor’s Energy Select Sector Index, the underlying benchmark for the Energy Select Sector SPDR (NYSEArca: XLE), is up over 12% just this month. The double-leveraged ProShares UltraShort Oil & Gas (NYSEArca: DUG) has also impressed in recent weeks.
ProShares UltraPro Short Russell 2000 ETF (NYSEArca: SRTY)
One-month gain: 21.6%
Comment: SRTY, a triple leveraged spin on the widely followed Russell 2000 Index, has been loving life since the Russell 2000 made a “death cross” last month. That is the technical term for when a security’s near-term 50-day moving average dips below its long-term 200-day moving average. That death cross chatter gained momentum around Sept. 22. Since Sept. 23, SRTY is up 11%.
Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST)
One-month gain: 33.3%
Comment: JDST is the small-cap equivalent of the aforementioned DUST. That is to say JDST is not for the faint of heart and that is to put things mildly. Although JDST is up more than 33% over the past month, that has not been the easiest of moves for investors to stick around for. The past two days prove as much. DUST plunged 29.3% on Wednesday only to gain nearly 18% on Thursday. [Enter the Bear for Gold Miners ETFs]
VelocityShares 3x Inverse Silver ETN (NYSEArca: DSLV)
One-month gain: 29.8%
Comment: There is one similarity between long silver and long Russia ETFs: Investors have continued to allocate money to these volatile products even as the markets the funds track have tumbled. Consider this: DSLV is up more than 73% over the past 90 days, but over that same period the iShares Silver Trust (NYSEArca: SLV) has added nearly $500 million in new assets.
Direxion Daily Brazil Bull 3x Shares (NYSEArca; BRZU)
One-month loss: 23%
Comment: The intent of this list was not to unveil a full commitment to bearish leveraged ETFs and yes, BRZU has stumbled over the past month. For the risk-tolerant investor and the emphasis should be on risk tolerant, there is near-term opportunity with BRZU leading up to Brazil’s Oct. 26 runoff election between President Dilma Rousseff and challenger Dilma Rousseff. Consider this: BRZU is up 35.4% since Oct. 3, a period that includes last Sunday’s first-round election in which Neves emerged as a credible threat to Rousseff’s reelection hopes. A new poll out Wednesday showed Neves as the frontrunner.
BRZU’s bearish cousin, the Direxion Daily Brazil 3x Bear Shares (NYSEArca: BRZS), was closed last month.
Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS)
One-month gain: 18.5%
Comment: Like oil and gas producers, semiconductor stocks and ETFs have spent significant time as industry leaders this year. And like oil and gas stocks, semiconductor makers and the relevant ETFs have fallen out of bed in significant fashion in recent weeks. Indicating that the market believes there is more downside to come for chip makers, SOXS was up 10.8% from Sept. 9 through Oct. 8. On Thursday, the ETF gained nearly 8% on almost six times the average daily volume.
ETF Trends editorial team contributed to this post.