Looking for more ways to play Tesla stock? In a U.S. industry first, AXS Investments has introduced an ETF that tracks just that one popular stock. And it has launched additional ETFs that track four more popular individual stocks.
The Securities and Exchange Commission is urging shareholders to be wary. "I worry that these single-stock ETFs pose yet another, perhaps greater, risk for investors and the markets," SEC Commissioner Caroline Crenshaw said in a release.
The crux of concern by Crenshaw and others is that some of the new funds are leveraged. The fund invests with borrowed money. That magnifies the fund's upside and downside potential.
Shareholders share in those magnified performance returns. But a key point is that shareholders themselves are not directly leveraged. And while funds may invest on margin, shareholders are not investing in these funds on margin.
Tesla Stock
In addition to Tesla stock, AXS's four other new ETFs target PayPal, Pfizer, Nike and Nvidia.
PayPal, Pfizer and Nike got two ETFs each. One takes a bullish approach, the other takes a bearish inverse approach. AXS created only a bearish inverse ETF for Nvidia.
The fund that tracks Tesla stock is inverse and does not use leverage.
AXS's funds tracking the other four stocks are leveraged.
The single-stock ETFs that AXS launched: AXS TSLA Bear Daily ETF, AXS 1.25X NVDA Bear Daily ETF, AXS 1.5X PYPL Bear Daily ETF, AXS 1.5X PYPL Bull Daily ETF, AXS 2X NKE Bear Daily ETF, AXS 2X NKE Bull Daily ETF, AXS 2X PFE Bear Daily ETF and AXS 2X PFE Bull Daily ETF.
In addition, AXS launched several ETFs that focus on themes, including carbon neutrality.
Single-stock ETFs are new in the U.S.. They've been available in Europe for about four years. Several are far more leveraged than the AXS offerings in the U.S.
Some also track Tesla stock. For one, investors can buy GraniteShares 3x Long Tesla Daily ETP. They can also use GraniteShares 3x Short Tesla Daily ETP.
Those funds have shown hefty volatility.
Other Fund Companies In This Space
Additional fund companies, reportedly including Direxion, are working to introduce single-stock ETFs in the U.S.
Direxion reportedly has sought permission to launch 21 new ETFs. They would track stocks such as Facebook parent Meta Platforms, Nvidia, Netflix, Apple, Microsoft, Amazon and Alphabet.
When To Use A Tesla Stock ETF
Why use a single-stock ETF? "These are important tools for investors," AXS CEO Greg Bassuk told IBD. "There are a range of important uses. One is when news relating to a company (is imminent) that will likely give an investor a more bullish or bearish view in the short view. That means today or tomorrow. They expect a stock to pop or dip. That could be during earnings seasons when a company is going to announce results."
These specialized funds, such as the one focused on Tesla stock, give investors a way to segregate their bets on an individual security from bets on, say, an index that may contain the security such as the S&P 500, Bassuk says.
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