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The Zacks Analyst Blog Highlights: REW, TECS, FNGD, SSG And SOXS

Published 04/03/2018, 09:00 PM
Updated 07/09/2023, 06:31 AM

For Immediate Release

Chicago, IL – April 4, 2018 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include ProShares UltraShort Technology (V:REW) , Direxion Daily Technology Bear 3x Shares TECS, BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN FNGD, ProShares UltraShort Semiconductors ETF (AX:SSG) and Direxion Daily Semiconductor Bear 3x Shares SOXS.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Beat the Tech Blues with These Inverse ETFs

The technology sector, which is the biggest contributor of the nine-year bull market and the Trump rally, has been caught in vicious trading over the past month. This was primarily due to the huge decline in large-capitalization technology and Internet stocks, as a result of a slew of negative news from some of the key companies in the space (read: 5 Reason Why FANG ETFs Lost Their Charm in March).

The initial panic was triggered on Mar 19 when data analytics firm Cambridge Analytica revealed data breach of more than 50 million of Facebook (NASDAQ:FB) users. This resulted in a sharp decline in the stock and the broader sector. This sparked concerns about data privacy and security and the prospect of more regulations. NVIDIA (NASDAQ:NVDA) announced the suspension of self-driving tests, raising concerns over new growth areas in the space and pushing shares down. Twitter also dropped on expectations of further regulations on its platform. while Tesla (NASDAQ:TSLA) is losing on concerns over a recent Model X accident and lower-than-expected Model 3 production. Netflix (NASDAQ:NFLX) is probably being crushed for its super-high valuation.

Adding to the woes was the decline in Amazon (NASDAQ:AMZN) shares late last week, which shed about $30 billion from its market value on a single day. News that President Donald Trump is looking to target the e-commerce giant over antitrust or competition laws and is considering ways to change the tax treatment took its toll on the stock. The stock yet again took a hit to start the week as Trump continued his series of Twitter attacks on the online retailer (read: ETFs to Turn Amazon's Pain Into Your Gain).

The sell-off deepened with resurgent fears of a trade war between United States and China. This is especially true as China has retaliated against Donald Trump’s taxes on imported steel and aluminum with its own tariff of up to 25% on a series of 128 products worth $3 billion from the United States, including pork and wine, effective Apr 2. The Trump administration, looking to punish Beijing over technology transfer policies, is also expected to reveal the list of Chinese imports targeted for U.S. tariffs by this week.

Trump has already signed an executive memorandum to impose tariffs on up to $60 billion in Chinese imports, targeting the technology, telecom, and apparel sectors. The round of sanctions and retaliation could trigger a global trade war, hurting the global economy and corporate profits at big U.S. exporters. In particular, technology stocks are expected to be hit hard as most of the tech companies, especially semiconductor manufacturers and software companies, have large operations in the Chinese market.

The ultra-popular Select Sector SPDR Technology ETF pulled out more than $539 million in capital since the Facebook scandal, per The fund has declined 6.6% over the past month. The negative sentiment is likely to continue, at least in the near term, as the technology sector has a dismal Zacks Rank of 10 out of 16 and falls in the bottom 38%. Further, the sector has been trading at a P/E ratio of 20.93, the second highest of all the 16 Zacks sectors, signaling some pain in the coming days. Return on equity is also lower than many other sectors at 6% (read: Wall Street Sees Worst Week in 2 Years: ETF Winners & Losers).

Given this, investors could easily tap this bearish trend by considering a near-term short on the technology sector. Fortunately, with the advent of ETFs, this is quite easy as there are a few options to accomplish this task. Below we highlight them and some of the key differences between each.

ProShares UltraShort Technology

This fund seeks two times (2x) inverse exposure to the Dow Jones U.S. Technology Index, charging 95 bps in fees. It has amassed $3.7 million in its asset base and trades in a paltry volume of around 8,000 shares per day on an average. REW has returned about 12.9% over the past month.

Direxion Daily Technology Bear 3x Shares

Investors having a more bearish view and a higher risk appetite may find TECS interesting as the product provides three times (3x) inverse exposure to the daily performance of the Technology Select Sector Index. It has amassed about $4.7 million in its asset base while charging 95 bps in fees per year from investors. Volume is good as it exchanges around 104,000 shares a day on average. The fund has gained 17.8% in the same timeframe.

BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN

This ETN provides three times inverse exposure to the NYSE FANG+ Index, which is an equal-dollar weighted index targeting the highly-traded growth stocks of next generation technology and tech-enabled companies in the technology and consumer discretionary sectors. The index comprises the so-called five FANG stocks, Alibaba (NYSE:BABA), Baidu, NVIDIA, Tesla and Twitter. The note recently debuted in the space and has accumulated $48.5 million in AUM in a span of three months. It trades in a small volume of 23,000 shares and charges 0.95% in expense ratio. FNGD has gained 35.5% in a month (read: New Triple Leveraged FANG ETFs: Should You Buy?).

ProShares UltraShort Semiconductors ETF

This fund targets the semiconductor corner of the broader technology sector as it provides two times inverse exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. It is an unpopular and illiquid choice in the space with AUM of $2.6 million and average daily volume of around 12,000 shares. Expense ratio comes in at 0.95%. The fund has added 10.8% in the same timeframe.

Direxion Daily Semiconductor Bear 3x Shares

This ETF offers three times inverse exposure to the PHLX Semiconductor Sector Index, charging investors 95 bps in annual fees. It has amassed about $51.9 million in its asset base while trading in solid volumes of 1.1 million shares a day on average. The fund has surged 18.4% in the same timeframe.

Bottom Line

As a caveat, investors should note that such products are suitable only for short-term traders as these are rebalanced on a daily basis (see: all the Inverse Equity ETFs here).

However, for ETF investors, who are bearish on the technology sector for the near term, either of the above products could make an interesting choice. Clearly, a near-term short could be intriguing for those with high-risk tolerance, and a belief that “trend is the friend” in this corner of the investing world.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

DIR-D SM BR 3X (SOXS): ETF Research Reports

DIR-TEC BEAR3X (TECS): ETF Research Reports

PRO-ULS TECH (REW): ETF Research Reports

PRO-ULS SEMICON (SSG): ETF Research Reports

BMO-RM FG I3XIL (FNGD): ETF Research Reports

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