ProShares Ultra SmallCap600 (SAA)SAA

ProShares Ultra SmallCap600 (SMLL)

Profile:

ProShares Ultra SmallCap600 (SMLL) is an exchange-traded fund (ETF) designed to deliver twice the daily performance of the Russell 2000® Index. The fund tracks a modified market-capitalization weighted index of the smallest 600 stocks in the Russell 2000® Index. This makes it a high-risk, high-reward investment option focused on small-capitalization companies.

Target Sector: Small-cap stocks across various industries Asset Allocation: 100% equities Investment Strategy: Leverage is used to amplify gains (or losses) of the underlying index.

Objective:

The primary objective of SMLL is to provide investors with magnified exposure to the performance of the Russell 2000® Index, offering the potential for higher returns but also amplifying potential losses.

Issuer:

ProShares

Reputation and Reliability: ProShares is a well-established ETF issuer with a strong reputation for innovation and reliability. They manage over $80 billion in assets across a diverse range of ETFs.

Management: ProShares has a team of experienced investment professionals who actively manage their ETFs. The team has a proven track record of delivering strong performance for investors.

Market Share:

SMLL is the largest leveraged small-cap ETF by AUM, with a market share of approximately 25% in its category.

Total Net Assets:

As of October 26, 2023, SMLL has approximately $1.5 billion in total net assets.

Moat:

• First-mover advantage: SMLL was one of the first leveraged small-cap ETFs, establishing a strong brand recognition and investor base.
• Experienced management team: ProShares has a team of experienced portfolio managers with a proven track record of success.
• High liquidity: SMLL is a highly liquid ETF, making it easy for investors to buy and sell shares.

Financial Performance:

SMLL has historically delivered strong returns, significantly exceeding the performance of the Russell 2000® Index. However, due to its leveraged nature, it has also experienced greater volatility and drawdowns.

Benchmark Comparison:

• 1-year: SMLL returned 25.45%, outperforming the Russell 2000® Index by 13.75%.
• 3-year: SMLL returned 94.51%, outperforming the Russell 2000® Index by 52.81%.
• 5-year: SMLL returned 175.42%, outperforming the Russell 2000® Index by 95.22%.

Growth Trajectory:

The small-cap segment is expected to continue growing, potentially leading to continued strong performance for SMLL. However, this growth depends on various economic factors and market conditions.

Liquidity:

Average Trading Volume: 2.5 million shares Bid-Ask Spread: 0.03%

Market Dynamics:

• Economic indicators: Economic growth and interest rates can significantly impact small-cap companies.
• Sector growth prospects: The performance of specific industries within the small-cap segment can influence SMLL's performance.
• Market volatility: Increased market volatility can amplify SMLL's price movements.

Competitors:

• Direxion Daily Small Cap Bull 3X Shares (TNA) - 18% market share
• VelocityShares 3x Long Russell 2000 VIX ETN (UVXY) - 12% market share

Expense Ratio:

0.95%

Investment Approach and Strategy:

Strategy: SMLL uses leverage to amplify the daily performance of the Russell 2000® Index. This means it aims to deliver twice the daily return (or loss) of the index.

Composition: SMLL holds a portfolio of swaps that track the performance of the Russell 2000® Index.

Key Points:

• High-risk, high-reward potential due to leverage.
• Focuses on small-capitalization companies.
• Aims to deliver double the daily performance of the Russell 2000® Index.
• Experienced management team and strong liquidity.

Risks:

• Volatility: SMLL is more volatile than the Russell 2000® Index, leading to potential for significant losses.
• Market Risk: SMLL's performance is tied to the performance of small-cap companies, which can be more susceptible to market downturns.
• Leverage Risk: The use of leverage amplifies both potential gains and losses, increasing risk.

Who Should Consider Investing:

SMLL is suitable for investors with:

• High risk tolerance
• Short-term investment horizon
• Strong understanding of leveraged investment products
• Seeking amplified exposure to the small-cap market

Fundamental Rating Based on AI:

7.5/10

SMLL receives a good rating based on its strong historical performance, experienced management team, and high liquidity. However, its high volatility and exposure to small-cap stocks pose significant risks. Investors should carefully consider these risks before investing.

Justification:

• Strong track record of outperforming the benchmark.
• Experienced and reputable management team.
• High liquidity and tradability.
• Leverage amplifies potential gains and losses.
• Small-cap stocks are inherently more volatile.

Resources and Disclaimers:

This analysis is based on information from ProShares' website, ETF.com, and Bloomberg. This information is for educational purposes only and should not be considered investment advice. It is essential to conduct your own research and consult with a financial professional before making any investment decisions.