David Mazza, Head of Product at Direxion, and Tom Lydon, CEO of ETF Trends and ETF Database, speak about up-and-coming buy-and-hold ETF strategies with CNBC’s Bob Pisani on “ETF Edge.” This comes into play given Direxion’s recent launch of the High Growth ETF (HIPR), which tracks the results of the Russell 1000 or the Hyper-Growth Index.
Speaking to the methodology of this fund and the index, Maza explains how hyper-growth is about finding the high growth companies that have the potential for sustained growth going forward. It’s one thing to look at a chart based on recent sales. For HIPR, Mazza notes how HIPR combines a screen of companies that have grown in sales in the past, have high affected earnings growth, and high expected cash show growth.
The fund also looks at a company’s balance sheet to ensure that they are not over-leveraging or taking on significant debt to pay for that growth. There’s also the process of looking at stocks that have had positive momentum.
“This combination leads to a universe of stocks that have shown great growth in the past, but also show potential for growth going forward,” Mazza explains.
Jumping to Lydon, Pisani notes how this ETF hits many factors. HIPR is covering growth, quality, and momentum. Given this combination, the question becomes, how do they all work together, and what’s the weighting of each.
As Lydon states, “Conventional indexes have done fine, but we’re going to probably be in a period of time where certain factors are going to be challenged, and certain sectors are going to be challenged. What we’re finding, interviewing, and surveying advisers all the time about is that they’re moving and shifting a little bit away from low-cost pure beta strategies, and they don’t mind ending up paying more for intelligent strategies.”
That’s going to work in favor of Direxion, as they are using funds like HIPR to roll out more intelligent strategies.
Watch Tom Lydon And Dave Mazza discuss Hyper-Growth:
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