Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS)WEBS

ETF Direxion Daily Dow Jones Internet Bear 3X Shares (NYSEARCA: WEBS)

Profile:

Target Sector: Technology, specifically the Dow Jones Internet Index Asset Allocation: Inverse leveraged exposure (3x) to the Dow Jones internet Index through swaps Investment Strategy: Daily re-balancing of the portfolio to deliver 3x (-3x) the daily performance of the Dow Jones internet Index

Objective:

The primary objective of WEBS is to provide investors with leveraged short exposure to the Dow Jones internet index. This means that the ETF aims to achieve a daily return that is three times the inverse of the index's performance.

Issuer:

Company: Direxion Investments Reputation and Reliability: Direxion has been a leading provider of leveraged and inverse ETFs since its inception in 2006. The firm is known for its innovative products and active management style. Management: Direxion has a team of experienced portfolio managers and analysts who oversee the construction and management of its ETFs.

Market Share:

WEBS is a relatively small ETF in the leveraged and inverse space, with a market share of approximately 0.1% in its sector.

Total Net Assets:

As of November 14, 2023, WEBS has total net assets of approximately $13.9 million.

Moat:

• Leveraged Exposure: WEBS offers investors an opportunity to gain amplified exposure to the internet sector, potentially magnifying their gains (or losses) compared to traditional ETFs.
• Active Management: Direxion actively manages WEBS, aiming to maintain its 3x leverage and minimizing tracking error.

Financial Performance:

Historical Performance: WEBS has experienced significant volatility, reflecting its 3x leverage and focus on the dynamic internet sector. The ETF has produced positive returns in periods of market downturns but has also underperformed during strong market rallies. Benchmark Comparison: WEBS typically tracks the inverse of the Dow Jones internet index closely but may deviate slightly due to its daily rebalancing and leverage.

Growth Trajectory:

The growth of WEBS will largely depend on the future performance of the internet sector and the overall appetite for leveraged investment products.

Liquidity:

Average Trading Volume: WEBS has an average trading volume of approximately 40,000 shares per day, indicating moderate liquidity. Bid-Ask Spread: The typical bid-ask spread for WEBS is around 0.05%, indicating relatively tight trading conditions.

Market Dynamics:

WEBS is primarily affected by factors influencing the internet sector, such as:

• Technological Advancements: Major advancements in areas like AI, cloud computing, and mobile technology
• Macroeconomic Conditions: Interest rate changes, economic growth, and global trade tensions
• Investor Sentiment: Risk appetite and general market sentiment towards the technology sector

Competitors:

• ProShares UltraPro Short QQQ (SQQQ)
• Direxion Daily Technology Bear 3X Shares (TECS)
• VelocityShares Daily Inverse VIX Short-Term ETN (XIV)

Expense Ratio:

WEBS has an expense ratio of 0.95%, which includes management fees and other operating expenses.

Investment Approach and Strategy:

• Strategy: WEBS aims to achieve 3x (-3x) the inverse daily performance of the Dow Jones internet Index through the use of swap agreements.
• Composition: The ETF primarily holds swap agreements that deliver the desired leveraged exposure to the index.

Key Points:

• WEBS offers leveraged short exposure to the Dow Jones internet index.
• The ETF is actively managed and rebalanced daily.
• WEBS is suitable for experienced investors who understand leveraged investing and are comfortable with its associated risks.

Risks:

• Volatility: WEBS is a highly volatile ETF due to its leverage and focus on the internet sector.
• Market Risk: The ETF's performance is directly tied to the Dow Jones internet index, which can experience significant swings.
• Counterparty Risk: WEBS relies on swap agreements to achieve its desired exposure, and the ETF is exposed to the creditworthiness of its counterparties.
• Tracking Error: Due to its daily rebalancing, WEBS may not perfectly track the inverse 3x performance of the index.

Who Should Consider Investing:

WEBS is suitable for experienced investors who:

• Have a short-term bearish view on the internet sector.
• Are comfortable with leveraged investing and the associated risks.
• Have a high-risk tolerance.

Fundamental Rating Based on AI:

Rating: 6/10

While WEBS offers an innovative and potentially lucrative way to gain leveraged exposure to the internet sector, it comes with significant risks. Its high volatility and dependence on market conditions require a strong understanding of leveraged investing and a high-risk tolerance.

Justification:

• Strengths:
  • Efficient leverage exposure to the internet sector.
  • Active management potentially minimizing tracking error.
  • Moderate liquidity and tight bid-ask spread.
• Weaknesses:
  • High volatility and potential for significant losses.
  • Market risk heavily dependent on the Dow Jones internet index performance.
  • Counterparty risk associated with swap agreements.

Resources and Disclaimers:

Sources:

• Direxion Investments website
• Yahoo Finance
• Google Finance

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting thorough due diligence.