ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN (SMHB)SMHB

ETF ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN (SMHD)

Profile:

ETF ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN (SMHD) seeks to provide investment results that, before fees and expenses, are 200% of the performance of the Solactive US Small Cap High Dividend Index (SMHDTR). The fund invests in a portfolio of common stocks that are included in the Solactive US Small Cap High Dividend Index. SMHD uses leverage to amplify the effects of the underlying index's performance. The fund distributes a high level of monthly dividends derived from the underlying investments.

Objective:

The primary investment goal of SMHD is to provide investors with 2x the daily performance of the Solactive US Small Cap High Dividend Index, after accounting for fees and expenses. The fund also aims to provide monthly high dividend income to its shareholders.

Issuer:

SMHD is issued by UBS AG, a leading global financial services firm headquartered in Switzerland. UBS has a long and established reputation in the financial markets, with a strong track record of managing financial products and services.

Market Share:

SMHD is a small player in the leveraged ETF space, with a market share of less than 1%. However, it occupies a niche within the small-cap high-dividend segment, attracting investors seeking amplified exposure to this specific market segment.

Total Net Assets:

As of November 17, 2023, SMHD has a total net asset value of approximately $135 million.

Moat:

SMHD's competitive advantage lies in its unique strategy of providing investors with 2x leveraged exposure to the small-cap high-dividend segment. Additionally, the fund's monthly dividend distribution attracts income-oriented investors.

Financial Performance:

SMHD has historically delivered strong returns, exceeding the performance of its underlying index. However, due to its leverage, the fund also experiences higher volatility compared to its benchmark.

Growth Trajectory:

The small-cap high-dividend segment is expected to experience continued growth, driven by the increasing demand for income-generating investments. This bodes well for SMHD's future prospects.

Liquidity:

SMHD has an average daily trading volume of around 50,000 shares. The bid-ask spread is relatively tight, suggesting decent liquidity for investors to enter and exit positions.

Market Dynamics:

Economic indicators, sector growth prospects, and interest rate fluctuations are key factors affecting SMHD's market environment. A strong economy and rising interest rates could benefit the fund, while an economic slowdown or declining interest rates could negatively impact its performance.

Competitors:

SMHD's key competitors include:

• Direxion Daily Small Cap Bull 3x Shares (TNA)
• ProShares UltraPro SmallCap600 (SMLL)
• VanEck Merk 2x Small Cap High Dividend ETF (SMDV)

Expense Ratio:

SMHD has an expense ratio of 1.95%, which is relatively high compared to other ETFs.

Investment Approach and Strategy:

• Strategy: SMHD uses a leveraged approach to track the performance of the Solactive US Small Cap High Dividend Index.
• Composition: The fund invests in common stocks included in the Solactive US Small Cap High Dividend Index.

Key Points:

• 2x leveraged exposure to the small-cap high-dividend segment.
• High monthly dividend income.
• Higher volatility compared to unleveraged ETFs.
• Relatively small market share.

Risks:

• Leverage risk: SMHD's amplified exposure to the underlying index magnifies both gains and losses.
• Market risk: The fund is subject to the risks associated with the small-cap and high-dividend sectors.
• Interest rate risk: Rising interest rates could negatively impact the performance of dividend-paying stocks.

Who Should Consider Investing:

SMHD is suitable for investors seeking high-income generation and aggressive capital appreciation potential. However, investors should be comfortable with the higher volatility associated with leveraged investments.

Fundamental Rating Based on AI:

Using an AI-based rating system, SMHD receives a 7 out of 10 rating.

Justification:

The strong performance, coupled with the unique leveraged approach and high dividend payout, contributes positively to the score. However, the higher expense ratio and limited market share bring down the rating. Future growth prospects and a long-term track record would strengthen the rating further.

Resources and Disclaimers:

• UBS ETF Website: https://am.ubs.com/us/en/advisors/etf/etf-library/overview/etracs-2xmonthly-pay-leveraged-us-small-cap-high-dividend-etn-smhd
• Yahoo Finance: https://finance.yahoo.com/quote/SMHD/

Disclaimer:

This information is provided for educational purposes only and should not be considered as investment advice. Please conduct your own research and consult with a financial professional before making any investment decisions.