The coronavirus pandemic is infecting the markets on a large scale, but what about small cap and mid cap businesses? In a recent Xchange post by Direxion Investments, one risk traders should be wary of is the amount of debt these companies are carrying.
“Another issue often highlighted by small- and mid-cap commentators is the high degree of debt these companies carry in relation to their size,” the post said. “Corporate debt has reached staggering new levels in recent years, with outstanding nonfinancial corporate debt in the U.S. has grown by more than 40% over the past seven years to reach $10.1 trillion in 2019, according to data compiled by the Federal Reserve Board. But this trend has been felt the strongest in small and mid-cap companies with lower revenues to balance out the added liabilities.”
For traders salivating at the market moves in small caps and mid caps, here are four funds to look at:
Direxion Daily Mid Cap Bear 3X Shares (MIDZ): seeks daily investment results of 300% of the inverse (or opposite) of the daily performance of the S&P MidCap® 400 Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets. The index measures the performance of 400 mid-sized companies in the United States.
Direxion Daily Mid Cap Bull 3X Shares (MIDU): seeks daily investment results of 300% of the daily performance of the S&P MidCap® 400 Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index measures the performance of 400 mid-sized companies in the United States.
Direxion Daily Small Cap Bull 3X Shares (TNA): seeks daily investment results of 300% of the daily performance of the Russell 2000® Index. The fund invests at least 80% of its net assets in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000® Index, based on a combination of their market capitalization and current index membership.
Direxion Daily Small Cap Bear 3X Shares (TZA): seeks daily investment results of 300% of the inverse (or opposite) of the daily performance of the Russell 2000® Index. The fund invests in swap agreements, futures contracts, short positions or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund’s net assets. The index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000® Index, based on a combination of their market capitalization and current index membership.
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