Single-stock ETFs have been soaring, with many more than doubling in value over the past month amid the historic Wall Street comeback. Unlike traditional ETFs, which typically track a broad index or sector, single-stock ETFs provide exposure to the performance of one specific company by using derivatives. This allows investors to gain exposure to a particular stock without having to buy the stock directly. 

Single-stock ETFs tap the gambling mindset that exists in markets. There are around 100 single-stock ETFs on the market. We have highlighted five single-stock ETFs that doubled over the past month. (See: all the Single Stock ETFs here). 

Defiance Daily Target 2X Long HIMS ETF HIMZ – Up 344.5%

Defiance Daily Target 2X Long HIMS ETF seeks daily leveraged investment results of two times (200%) the daily percentage change in the share price of Hims & Hers Health Inc. HIMS. It charges 1.31% in annual fees and has amassed $80.1 million in its asset base. 

Leverage Shares 2X Long HOOD Daily ETF HOOG – Up 131.5%

Leverage Shares 2X Long HOOD Daily ETF seeks daily levered investment results of two times the daily percentage change in the price of the common stock of Robinhood HOOD. It charges 75 bps in annual fees and has accumulated $5.9 million in its asset base. 

GraniteShares 2X Long COIN Daily ETF CONL – Up 109.1%

GraniteShares 2x Long COIN Daily ETF seeks two times the daily percentage change of the common stock of Coinbase Global COIN. It has amassed $815.5 million in its asset base while charging 1.15% in annual fees (read: Coinbase to Join S&P 500, Shares Rally: ETFs to Buy).

GraniteShares 2x Long VRT Daily ETF VRTL – Up 100.6%

GraniteShares 2x Long VRT Daily ETF seeks daily investment results of two times the daily percentage change of the common stock of Vertiv Holdings Co. VRT. It charges 1.5% in annual fees and has amassed $5.7 million in its asset base since late March. 

Direxion Daily MU Bull 2X Shares MUU – Up 99.4%

Direxion Daily MU Bull 2X Shares seeks daily investment results of 200% of the performance of the common shares of Micron Technology Inc. MU. It has AUM of $28.8 million and charges 97 bps in annual fees.

More Gains Ahead?

These best-performing ETFs offer leveraged plays on tech stocks, which are on the surge once again, given solid corporate earnings and renewed market optimism. The latest earnings underscore the resilience and growth potential of AI-focused companies. While the significant capital expenditures raise questions about short-term profitability, the long-term potential of AI technologies presents substantial opportunities for growth. 

In particular, Coinbase rallied on optimism over its entry into the S&P 500 Index on May 19. Coinbase's addition to the S&P 500 underscores a broader acceptance of cryptocurrency-related companies in mainstream finance. The move will attract new investors to the company, who would indirectly purchase the company through financial products invested in the S&P 500. 

Hims & Hers Health has soared more than 140% over the past month, driven by robust earnings results and a strategic partnership with pharmaceutical giant Novo Nordisk NVO to sell Wegovy. This collaboration marks a pivotal moment for Hims & Hers as it expands its offerings in the burgeoning weight-loss treatment market (read: ETFs to Capitalize on the Novo Nordisk-Septerna Deal).

Story Continues

Downside Risk to Single-Stock Investing

While single-stock ETFs offer a focused way to invest in a company, they come with significant risks due to their lack of diversification and exposure to the volatility of a single stock. They are typically more suited for experienced investors who understand and are willing to accept these risks. Here are some of the downsides of these ETFs:

High Risk: If the specific company underperforms, investors could lose a substantial amount of money.

Lack of Diversification: One of the key principles of risk management in investing is diversification. Single-stock ETFs go against this principle, as they are invested entirely in one company.

Market Volatility: A single-stock ETF is subject to the volatility of the individual stock, which can be influenced by company-specific news and events.

Management Fees: While typically lower than mutual funds, ETFs still come with management fees, which can eat into your investment returns over time, especially in a narrowly focused fund like a single-stock ETF.

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Novo Nordisk A/S (NVO):Free Stock Analysis Report

Micron Technology, Inc. (MU):Free Stock Analysis Report

Vertiv Holdings Co. (VRT):Free Stock Analysis Report

Hims & Hers Health, Inc. (HIMS):Free Stock Analysis Report

Coinbase Global, Inc. (COIN):Free Stock Analysis Report

Robinhood Markets, Inc. (HOOD):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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