By Suzanne McGee
(Reuters) – Direxion said on Wednesday that it has launched new leveraged and inverse exchange-traded funds tied to two stocks, Palantir Technologies and Warren Buffett’s Berkshire Hathaway that offer traders a chance to get twice the daily upside movement of each stock or capture the inverse of a daily decline.
Analysts described the launches as an odd couple: while Palantir resembles other stocks that have been the basis of runaway successes in the rapidly growing leveraged ETF space, such as Nvidia, MicroStrategy and Tesla in recording big gains in tandem with outsize volatility, Berkshire Hathaway has very low volatility.
“Palantir is very, very actively traded, and very, very volatile, so that’s going to appeal to the people who trade these leveraged ETFs,” said Todd Sohn, ETF analyst at Strategas. “Berkshire Hathaway, while it’s large and has done better than the market, just doesn’t offer that extra excitement.”
But Ed Egilinsky, head of sales and distribution, said he expects Berkshire Hathaway also to appeal to the day traders who make up the target audience for this kind of ETF product.
“It may not have the same kind of volatility associated with some other names, but it’s very widely held and there might be other reasons why people might want to trade around it rather than treating it only as an investment,” Egilinsky said.
For instance, if the coming year brings any news about the 94-year-old Buffet stepping away from the helm of his company, Egilinsky says investors could have strong views about whether his chosen successors would be able to perpetuate Buffett’s long-term track record.
Leveraged ETFs have exploded in size this year as the bull market has extended its run. The number has more than doubled in 2024, rising from 20 to 48, while inflows have exploded from $83 million in November 2023 to $2.38 billion last month.
(Reporting by Suzanne McGee; Editing by Alexandra Hudson)
