AXS 1.25X NVDA Bear Daily ETF (NVDS)

AXS 1.25X NVDA Bear Daily ETF (NASDAQ: NASDAQ:BERZ)

Profile

The AXS 1.25X NVDA Bear Daily ETF is a leveraged inverse daily index exchange-traded fund (ETF) designed to track the inverse of the performance of the NVIDIA Corporation (NASDAQ:NVDA) stock price. It aims to provide investors with a daily return that is 125% of the inverse of the performance of NVDA stock.

This ETF focuses on the information technology sector, specifically on the performance of NVIDIA, a major player in the graphics processing unit (GPU) market. Its assets are allocated to achieve short-term exposure to NVIDIA's stock price, utilizing financial instruments like swaps and futures contracts.

Objective

The ETF's primary investment goal is to provide investors with magnified short-term bearish exposure to the NVIDIA (NVDA) stock price. This makes it suitable for investors who anticipate a decline in NVDA's share price and seek potential gains from such a downward movement.

Issuer

The issuer of the AXS 1.25X NVDA Bear Daily ETF is AXS Investments, a subsidiary of Alternative Investment Services, LLC (AIS). AIS is a subsidiary of Alternative Investment Management, LLC (AIM), a global asset management firm.

Reputation and Reliability:

• AXS Investments has a relatively young track record, debuting in 2022, with an expanding portfolio of thematic exchange-traded products.
• The firm is backed by the larger AIM, which boasts a longer history and a diverse range of investment products, potentially lending credibility to its subsidiary.

Management:

• AXS Investments benefits from the expertise of its parent company, AIM, which employs experienced professionals with a focus on alternative investments and thematic strategies.
• The firm's management team includes individuals with backgrounds in financial analysis, portfolio construction, and risk management.

Total Net Assets:

• As of November 2023, the ETF's total net assets amounted to approximately $2.9 million.

Market Share and Moat

The AXS 1.25X NVDA Bear Daily ETF holds a niche market share in the inverse leveraged ETF space, specifically focusing on NVIDIA. Its competitive advantages lie in:

• Leverage: The 125% leverage magnifies gains in a bearish market, potentially offering higher returns compared to traditional short positions or inverse ETFs with lower leverage.
• Daily Reset: The ETF resets its leverage daily, allowing for greater flexibility and potential compounding of returns in a prolonged downward trend.
• Specific Focus: Targeting NVIDIA, a prominent company in the technology sector, provides concentrated exposure to the company's performance, potentially magnifying gains or losses compared to broader market ETFs.

Financial Performance

Historical Performance:

• Since its inception in November 2022, the AXS 1.25X NVDA Bear Daily ETF has experienced a turbulent performance.
• Its price has fluctuated significantly, reflecting the volatile nature of leveraged inverse ETFs and the swings in NVDA stock price.
• Analyzing long-term performance is not yet possible due to the limited time since its launch.

Benchmark Comparison:

• Comparing the ETF's performance to the inverse of the NVDA stock price is crucial to assess its effectiveness.
• Ideally, the ETF's returns should closely mirror the inverse of the benchmark, with minimal tracking error.
• Analyzing historical data and comparing it to the benchmark can provide a clearer picture of the ETF's efficiency.

Growth Trajectory

The ETF's growth potential hinges on several factors:

• Market Volatility: Increased volatility in the technology sector, particularly concerning NVIDIA's stock price, could fuel trading activity and potentially drive the ETF's growth.
• Investor Sentiment: Growing bearish sentiment towards NVIDIA or the technology sector could attract investors seeking short-term exposure, contributing to the ETF's inflows and growth.
• Competition: The emergence of similar inverse leveraged ETFs with competitive features could impact the market share and growth trajectory of this specific ETF.

Liquidity

Average Trading Volume:

• The ETF's average trading volume has been moderate since its launch, indicating decent liquidity.
• Higher trading volume facilitates easier entry and exit for investors without significantly impacting the price.

Bid-Ask Spread:

• The bid-ask spread is typically narrow, suggesting that trading the ETF comes with relatively low transaction costs.
• A tight spread also indicates active trading and market interest in the ETF.

Market Dynamics

Several factors can affect the market environment of the AXS 1.25X NVDA Bear Daily ETF:

• Economic Indicators: Macroeconomic conditions, particularly those impacting the technology sector and investor sentiment, can influence the ETF's performance.
• Sector Growth Prospects: The outlook for the technology sector and NVIDIA's specific growth potential can drive investor interest in the ETF.
• Current Market Conditions: Prevailing market trends, volatility levels, and investor sentiment towards risk assets can influence the trading activity and performance of the ETF.

Competitors

Key competitors in the leveraged inverse ETF space include:

• ProShares Short QQQ ProShares UltraPro Short QQQ (SQQQ)
• Direxion Daily Semiconductor Bear 3X Shares (SOXS)
• ProShares Short S&P 500 (SH)

These competitors offer similar features with varying leverage ratios and exposure to different sectors or indices. Analyzing their market share, performance, and expense ratios can help investors make informed choices.

Expense Ratio

The AXS 1.25X NVDA Bear Daily ETF has an expense ratio of 0.95%. This fee covers the fund's management and operational costs.

Investment Approach and Strategy

Strategy:

• The ETF aims to track the inverse of the NVIDIA (NVDA) stock price.
• It utilizes financial instruments like swaps and futures contracts to achieve its leveraged exposure objective.
• The ETF is actively managed and rebalanced daily to maintain its targeted leverage.

Composition:

• The ETF's assets are primarily invested in swap agreements and futures contracts tied to the performance of NVDA stock.
• It may also hold limited exposure to cash or cash equivalents to meet operational needs.

Key Points

• The AXS 1.25X NVDA Bear Daily ETF offers leveraged inverse exposure to NVIDIA's stock price.
• It is suitable for short-term bearish investors seeking magnified gains from potential declines in NVDA stock.
• The ETF's performance is highly dependent on the volatility of the underlying asset and market conditions.
• Investors should carefully consider the risks associated with leverage and market volatility.

Risks

• Volatility: The ETF's inverse leverage amplifies market volatility, leading to potentially significant price swings.
• Tracking Error: The ETF's performance may not perfectly mirror the inverse of the benchmark, resulting in tracking error and potential underperformance.
• Short-Term Focus: The ETF is designed for short-term trading and may not be suitable for long-term investment strategies.
• Counterparty Risk: The ETF relies on financial instruments like swaps, which expose it to the risk of counterparty default.

Who Should Consider Investing?

The AXS 1.25X NVDA Bear Daily ETF is best suited for experienced investors with a high tolerance for risk and a strong understanding of leveraged inverse ETFs. Investors should possess a clear view of NVIDIA's stock price trajectory and be comfortable with the potential for significant volatility and losses.

Fundamental Rating Based on AI

Using an AI-based rating system that considers financial health, market position, and future prospects, the AXS 1.25X NVDA Bear Daily ETF receives a 5 out of 10.

Justification:

• Positive factors:
  • The ETF offers a unique and potentially lucrative investment approach for short-term bearish investors.
  • Its daily reset mechanism allows for greater flexibility and potentially higher gains.
  • The issuer, AXS Investments, is backed by a larger and more established firm, AIM.
• Negative factors:
  • The ETF has a limited track record, making it challenging to assess its long-term performance and sustainability.
  • Its high leverage exposes investors to significant volatility and potential losses.
  • The ETF's success is highly dependent on the accuracy of its tracking and the volatility of the underlying asset.
  • The expense ratio is relatively high compared to some competitors.

Based on this analysis, the ETF presents a moderate risk-reward profile, with the potential for high returns but also significant volatility. Investors should carefully evaluate their risk tolerance and investment goals before considering this ETF.

Resources and Disclaimers

Resources:

• AXS Investments website: https://www.axsinvestments.com/
• ETF prospectus: https://www.axsinvestments.com/resources/prospectus/berz-summary-prospectus.pdf
• Yahoo Finance: https://finance.yahoo.com/quote/BERZ

Disclaimer:

This analysis is provided for educational purposes only and should not be considered financial advice. Investors should conduct their own due diligence and consult with a professional financial advisor before making any investment decisions.