Thus far, 2012 has proven to be a rather rocky year, with equities exhibiting up and down performances and struggling to find a definitive direction. The hoopla surrounding the eurozone debt debacle and the Fed’s “elusive” future stimulus programs have hindered markets from gaining any significant and sustainable momentum. Taking a look from a year-to-year perspective paints a somewhat different picture as several corners of the market have certainly delivered some rather impressive returns. And thanks to the ever-evolving ETF industry, investors have been able to cash in on these particular sectors quite handsomely [see the best performing ETFs in 2012].
Included on that list are a number of leveraged ETFs that seek to amplify exposure to various asset classes, highlighting the potential to use these products to capture attractive returns over extended periods of time. This might go against every financial advisor’s warning that these products are not intended for buy-and-hold investments, but it does go to show that it is certainly possible for leveraged products to deliver big returns when held throughout any type of market.
Below we highlight five leveraged ETPS that have posted big gains over the last year, dispelling the myth that holding these securities over an extended period of time is investing suicide.
1. Daily Retail Bull 3x Shares (RETL)
The retail industry has endured a bumpy ride for most of the year, with sales dropping off dramatically in recent months. Despite the summer slowdown, the retail sector has shown resilience from a year-to-year perspective. Direxion’s RETL, which offers 300% exposure to the Russell 1000 Retail Index, has gained a whopping 110% over the last year. The fund invests in a wide variety of retail companies, including specialty as well as diversified retailers such as department stores, discount stores and superstores. In regards to specific sub-sector allocations, RETL has a heavy allocation towards hypermarkets and super centers, home improvement, internet and apparel retail.
2. Ultra Nasdaq Biotechnology (BIB)
This offering from ProShares “Ultra” lineup gives investors access to one of the most lucrative and buzz-worthy sectors of the market: biotechnology. BIB seeks to deliver 2x daily leveraged exposure to the NASDAQ Biotechnology Index, a benchmark that includes about 120 different pharmaceutical and biotech companies. Biotech has quietly been enjoying an impressive run higher, and BIB has thrived as M&A activity and a general increase in appetite for risky securities have boosted prices; BIB is up 102% over the last year [see also Baby Boomers ETFdb Portfolio].
3. UltraPro QQQ (TQQQ)
Another offering from ProShares, this ETF gives 300% exposure to the NASDAQ-100 Index, which includes 100 of the largest domestic and international non-financial companies listed on the tech-heavy exchange. The Nasdaq, as measured by QQQ, has gained over 28% in the last year and as a result TQQQ has jumped nearly 87% over the trailing one-year period.
4. Daily Technology Bull 3x Shares (TECL)
Perhaps it is safe to say that the trend of the year is the technology sector given that this is the third leveraged tech fund on our list to deliver impressive returns. TECL, which made its debut in 2008, invests in a wide variety of technology sub-sectors, including computers, telecommunications, software and semiconductors. The fund’s underlying index, the Technology Select Sector Index (300%), currently maintains hefty allocations to Apple, Microsoft, IBM and AT&T. Currently, TECL is up 83% over the last year [see the High Tech ETFdb Portfolio with a free 7-day trial to ETFdb Pro].
5. Long Extended S&P 500 TR Index ETN (SFLA)
A simple yet practical product, this ETF offers 3x daily long exposure to the S&P 500 Index, making it one of the most popular speculative tools for traders with a bullish short-term outlook for U.S. large cap equities. Over the trailing one-year period, SFLA has gained over 71%.
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Disclosure: No positions at time of writing.