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Play This New Direxion ETF if You Are Eyeing Penny Stocks
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Direxion recently launched the Direxion Low Priced Stock ETF. The fund is mainly eyeing penny stocks. The tikcer code of the fund is LOPX. LOPX invests in companies trading at share prices between $2 and $5 at the time of purchase. Low priced stocks normally target the small-to-mid cap range of the market, with higher return potential on average, coupled with higher volatility.
LOPX seeks investment results, before fees and expenses, of the Solactive Two Bucks Index. The Solactive Two Bucks Index tracks the performance of 50 U.S.-listed companies trading between $2 and $5 at the time of annual reconstitution. The companies will remain unless share prices decline below $1.25, or increase beyond $10, at quarterly rebalance.
As of June 30, 2021, the 50 constituents had a median total market capitalization of $1.3 billion, with total market capitalizations ranging from $60 million to $29 billion, and was focused on the energy (31.94%) and health care (30.48%) sectors. Financials (12.08%) and Communication Services (11.63%) sectors round out the top four spots. Top three holdings are AMC Entertainment Holdings (9.55%), Tellurian (3.71%) and Agenus (3.25%). As far as geographical exposure is concerned, the fund is focused on United States (94.47%), Norway (1.60%) and Netherlands (1.37%).
How Does It Fit In A Portfolio?
Penny stocks are low-priced stocks -- under $5 a share -- that usually don't trade on an organized exchange. They are sometimes traded at the over-the-counter, or OTC, marketplace. They are highly speculative investments. However, some penny stocks represent excellent small companies that eventually become market leaders.
“Investors and traders are increasingly interested in gaining exposure to stocks outside of traditional indexes,” said David Mazza, Managing Director, Head of Product at Direxion. “On average, low priced stocks have four times fewer analyst recommendations than mega caps, highlighting their lack of coverage by investment banks. LOPX provides a way for Main Street investors to take advantage of stocks neglected by Wall Street research, which may be ripe for potential outperformance,” per the issuer.
Some investors may look for penny stocks as Wall Street has been hovering at a sky-high level. So, cheaper-priced stock investment may be desirable to some investors. Since most penny stocks have relatively few shares trading in the market and are thought of as somewhat illiquid, any good news related to earnings or business can trigger a sudden jump in price because traders, trying to buy shares to fill orders, increase their bids to appeal selling by stockholders wanting to take profits.
Is There Any Competition?
Currently, the fund should not face steep competition as the concept is pretty new. Several small-cap ETFs like Vanguard Small Cap Value ETF (VBR - Free Report) and Schwab U.S. Small-Cap ETF (SCHA - Free Report) may offer some peer pressure to this newbie, but that too not significant as most of the stocks under those funds are pricier than the ones that are part of LOPX.
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Play This New Direxion ETF if You Are Eyeing Penny Stocks
Direxion recently launched the Direxion Low Priced Stock ETF. The fund is mainly eyeing penny stocks. The tikcer code of the fund is LOPX. LOPX invests in companies trading at share prices between $2 and $5 at the time of purchase. Low priced stocks normally target the small-to-mid cap range of the market, with higher return potential on average, coupled with higher volatility.
LOPX seeks investment results, before fees and expenses, of the Solactive Two Bucks Index. The Solactive Two Bucks Index tracks the performance of 50 U.S.-listed companies trading between $2 and $5 at the time of annual reconstitution. The companies will remain unless share prices decline below $1.25, or increase beyond $10, at quarterly rebalance.
As of June 30, 2021, the 50 constituents had a median total market capitalization of $1.3 billion, with total market capitalizations ranging from $60 million to $29 billion, and was focused on the energy (31.94%) and health care (30.48%) sectors. Financials (12.08%) and Communication Services (11.63%) sectors round out the top four spots. Top three holdings are AMC Entertainment Holdings (9.55%), Tellurian (3.71%) and Agenus (3.25%). As far as geographical exposure is concerned, the fund is focused on United States (94.47%), Norway (1.60%) and Netherlands (1.37%).
How Does It Fit In A Portfolio?
Penny stocks are low-priced stocks -- under $5 a share -- that usually don't trade on an organized exchange. They are sometimes traded at the over-the-counter, or OTC, marketplace. They are highly speculative investments. However, some penny stocks represent excellent small companies that eventually become market leaders.
“Investors and traders are increasingly interested in gaining exposure to stocks outside of traditional indexes,” said David Mazza, Managing Director, Head of Product at Direxion. “On average, low priced stocks have four times fewer analyst recommendations than mega caps, highlighting their lack of coverage by investment banks. LOPX provides a way for Main Street investors to take advantage of stocks neglected by Wall Street research, which may be ripe for potential outperformance,” per the issuer.
Some investors may look for penny stocks as Wall Street has been hovering at a sky-high level. So, cheaper-priced stock investment may be desirable to some investors. Since most penny stocks have relatively few shares trading in the market and are thought of as somewhat illiquid, any good news related to earnings or business can trigger a sudden jump in price because traders, trying to buy shares to fill orders, increase their bids to appeal selling by stockholders wanting to take profits.
Is There Any Competition?
Currently, the fund should not face steep competition as the concept is pretty new. Several small-cap ETFs like Vanguard Small Cap Value ETF (VBR - Free Report) and Schwab U.S. Small-Cap ETF (SCHA - Free Report) may offer some peer pressure to this newbie, but that too not significant as most of the stocks under those funds are pricier than the ones that are part of LOPX.