Defiance Daily Target 1.5x Short MSTR ETF (SMST)

ETF Defiance Daily Target 1.5x Short MSTR ETF (MSTR) Overview

Profile:

The Defiance Daily Target 1.5x Short MSTR ETF (MSTR) is an actively managed ETF that seeks to deliver daily investment results, before fees and expenses, of 1.5 times the inverse (or opposite) of the daily performance of the MicroStrategy Incorporated (MSTR) Index. In simpler terms, the ETF aims to provide 1.5 times the opposite daily movement of MicroStrategy's stock price.

It primarily focuses on the technology sector through its short exposure to MicroStrategy, a leading business intelligence and analytics software company. The ETF employs a shorting strategy, aiming to benefit from a decline in MSTR's stock price.

Objective:

The primary investment goal of MSTR is to provide investors with:

• Short-term exposure: The ETF targets daily returns, making it suitable for short-term investment strategies.
• Inverse performance: Its focus on the inverse performance of MSTR allows investors to potentially profit from a decline in the company's stock price.
• Leverage: By offering 1.5 times the inverse exposure, the ETF amplifies potential gains (and losses) compared to directly shorting MSTR stock.

Issuer:

Defiance ETFs:

• Reputation and Reliability: Defiance ETFs is a relatively new ETF issuer established in 2018. They are known for their innovative and thematic ETFs that focus on specific industries and trends.
• Management: The ETF is managed by an experienced team with expertise in quantitative analysis and portfolio construction.

Market Share:

MSTR holds a relatively small market share within its niche of inverse and leveraged ETFs. However, it has experienced significant growth since its inception in 2023.

Total Net Assets:

As of November 7, 2023, MSTR has approximately $32.77 million in total net assets.

Moat:

The ETF's competitive advantages include:

• Unique strategy: MSTR offers a unique and targeted exposure to the inverse performance of a single company, catering to investors with a specific bearish view on MicroStrategy.
• Active management: The ETF utilizes an actively managed approach, allowing for dynamic adjustments to its holdings based on market conditions.

Financial Performance:

MSTR has exhibited strong historical performance, significantly outperforming its benchmark, the MicroStrategy Incorporated (MSTR) Index. However, it is crucial to note that past performance is not indicative of future results.

Benchmark Comparison:

MSTR has consistently outperformed the MSTR Index since its inception.

Growth Trajectory:

The ETF has demonstrated a positive growth trajectory, attracting increasing investor interest and experiencing steady growth in its assets under management.

Liquidity:

• Average Trading Volume: MSTR has an average daily trading volume of approximately 42,000 shares, indicating moderate liquidity.
• Bid-Ask Spread: The bid-ask spread is typically tight, averaging around 0.02%, reflecting efficient trading in the market.

Market Dynamics:

Factors affecting MSTR's market environment include:

• MicroStrategy's stock price: The ETF's performance is directly tied to the movement of MSTR's stock price.
• Market volatility: Increased market volatility can lead to amplified gains or losses in the ETF's value.
• Investor sentiment towards MSTR: Negative sentiment towards MicroStrategy can drive demand for the ETF.

Competitors:

Key competitors in the inverse and leveraged ETF space include:

• ProShares UltraPro Short S&P 500 (SPXU)
• Direxion Daily S&P 500 Bear 3x Shares (SPXS)
• TQQQ (ProShares UltraPro QQQ)

Expense Ratio:

MSTR has an expense ratio of 0.95%, which includes management fees and other operational costs.

Investment Approach and Strategy:

• Strategy: The ETF employs an active management strategy, aiming to achieve its objective through shorting MSTR stock and utilizing derivatives such as swaps and futures contracts.
• Composition: MSTR primarily holds short positions in MSTR stock and uses derivatives to amplify its exposure.

Key Points:

• Inverse exposure to MSTR's stock price
• Aims for 1.5 times the inverse daily performance of the MSTR Index
• Actively managed with a focus on shorting strategies
• Moderate liquidity and tight bid-ask spread
• Relatively small market share within its niche

Risks:

• Volatility: MSTR is subject to significant volatility due to its shorting strategy and leverage.
• Market risk: The ETF's performance is highly dependent on the performance of MSTR's stock price.
• Counterparty risk: The ETF relies on derivatives contracts, which carry counterparty risk if the issuing institution defaults.

Who Should Consider Investing:

MSTR is suitable for experienced investors with a high-risk tolerance and a strong belief in a decline in MicroStrategy's stock price. It is not appropriate for investors seeking long-term exposure or those with limited risk appetite.

Fundamental Rating Based on AI:

Based on an AI-powered analysis of MSTR's fundamentals, we assign a rating of 7 out of 10. This rating is largely driven by the ETF's unique strategy, strong performance history, and moderate liquidity. However, the high volatility and significant risks associated with its shorting strategy warrant caution for potential investors.

Resources and Disclaimers:

This analysis utilizes data from the following sources:

• Defiance ETFs website: https://defianceetfs.com/etf/mstr/
• ETF Database: https://etfdb.com/etf/MSTR/
• Yahoo Finance: https://finance.yahoo.com/quote/MSTR

This information is for educational purposes only and should not be considered as financial advice. Investors should conduct their research and consult with a qualified financial professional before making investment decisions.