Direxion Daily Financial Bear 3X Shares (FAZ)FAZ

ETF Direxion Daily Financial Bear 3X Shares (FAZ)

Profile:

• Focus: Inversely tracks the price performance of the 3x S&P 500 Financial Select Sector Index. Expects a decline in financial sector stocks, offering leveraged exposure to that decline.
• Asset Allocation: Primarily invests in financial instruments, such as futures contracts, designed to generate a return that is 3 times the inverse of the S&P 500 Financial Select Sector Index performance.
• Investment Strategy: Uses daily leveraged swaps and futures contracts to attempt to deliver -300% of the S&P 500 Financial Select Sector Index performance. Aims for short-term results and resets its leverage daily.

Objective:

• To achieve a daily investment return that is -300% of the performance of the S&P 500 Financials Select Sector Index.

Issuer:

• Company: Direxion Investments
• Reputation and Reliability: Established in 2007, Direxion is known for providing thematic and alternative ETF investment solutions. It has a good track record in the market, winning multiple awards for its products and services.
• Management: The company is led by a team of experienced professionals with expertise in quantitative analytics, portfolio management, and risk management.

Market Share:

• Direxion Daily Financial Bear 3X Shares (FAZ) is a significant player within the Bear 3x Inverse Financial sector ETF segment.

Total Net Assets:

• As of January 1, 2021, the total net assets of FAZ were approximately $350 million.

Moat:

• FAZ offers a unique way to achieve leveraged exposure to a decline in the financial sector.
• The expertise of Direxion's management team and its experience in leveraging investment strategies provide a competitive edge.
• The ETF targets a specific niche market, offering investors targeted exposure to financial sector fluctuations.

Financial Performance:

• FAZ's performance depends significantly on the underlying S&P 500 Financials Select Sector Index's direction.
• During periods of significant financial sector decline, the ETF has historically generated substantial returns.
• However, its performance can suffer during periods of positive market movement within the financial sector.

Benchmark Comparison:

• Compared to the S&P 500 Financials Select Sector Index, FAZ aims to deliver a performance that is inversely proportional and three times its magnitude.
• An investor should track how closely FAZ mirrors its target performance compared to the index.

Growth Trajectory:

• The growth of FAZ relies heavily on the market sentiment towards the financial sector and its volatility.
• Increased volatility and expectations of a declining financial sector market could lead to increased demand for FAZ.

Liquidity:

• Average Trading Volume: Approximately 3 million shares (as of January 1, 2021)
• Bid-Ask Spread: Relatively narrow, indicating good liquidity and ease of trading.

Market Dynamics:

• Economic indicators impacting the financial sector, such as interest rates, inflation, and economic growth, play a significant role.
• Sector growth prospects and overall market sentiment towards the financial sector influence the ETF's performance.

Competitors:

• Key competitors include ProShares UltraPro Short Financials (SKF), which also offers 3x leveraged inverse exposure to the financial sector.
• Other options include SPDR S&P Bank ETF (KBE), which offers a more traditional short exposure to the financial sector.

Expense Ratio:

• The expense ratio for FAZ is 0.90%. This covers management fees and other operational costs.

Investment Approach and Strategy:

• Strategy: FAZ uses a leveraged swap and futures-based strategy to achieve its -300% daily return objective based on the S&P 500 Financials Select Sector Index performance.
• Composition: The ETF primarily invests in short-term financial instruments, including derivatives, to achieve its desired leverage and exposure.

Key Points:

• FAZ provides leveraged exposure to a potential decline in the financial sector.
• The ETF resets its leverage daily, making it unsuitable for long-term investments.
• Investors should carefully consider their risk tolerance and market outlook before investing.

Risks:

• Volatility: FAZ's leveraged nature significantly amplifies market volatility, leading to potential large losses.
• Market Risk: The ETF's performance is highly dependent on the financial sector's performance. A positive market movement can result in significant losses for FAZ investors.
• Tracking Error: FAZ may not perfectly replicate its target index performance, leading to potential deviations.

Who Should Consider Investing:

• Experienced investors with a high-risk tolerance and a strong conviction in an impending financial sector decline.
• Investors looking for short-term, tactical exposure to the financial sector.
• Investors comfortable with the amplified volatility associated with leveraged investment strategies.

Fundamental Rating Based on AI: 7.5/10

FAZ's AI-based fundamental rating considers various factors, including its financial performance, market position, management expertise, and future prospects. The rating of 7.5 reflects its potential for high returns during financial sector decline but also acknowledges the associated risks and volatility.

Resources and Disclaimers:

• Direxion Investments Website: https://www.direxion.com/product/etfs/direfxion-daily-financial-bear-3x-shares
• Morningstar: https://www.morningstar.com/etfs/arcx/faz/quote
• Yahoo Finance: https://finance.yahoo.com/quote/FAZ?p=FAZ

Disclaimer: The information provided is for educational purposes only and should not be considered investment advice. Investing involves risk, and investors should consult with a qualified financial professional before making any investment decisions.