On the back of more harsh rhetoric from the volatile regime in North Korea, one of this year's hottest (and newest)
leveraged exchange-traded funds continues surging. Even a modest decline this week, the Direxion Daily Aerospace & Defense Bull
3X Shares (NYSE: DFEN) is still up more over 60 percent
since its May 3 inception, and momentum is strong for the only leveraged ETF dedicated to aerospace defense stocks.
DFEN attempts to deliver triple the daily returns of the Dow Jones U.S. Select Aerospace & Defense Index. That
benchmark is a cap-weighted collection of some of the most familiar and largest aerospace and defense equities.
“Aerospace companies include manufacturers, assemblers and distributors of aircraft and aircraft parts. Defense
companies include producers of components and equipment for the defense industry, such as military aircraft, radar equipment and
weapons,” according to
Direxion.
Top holdings in the index include Boeing Co (NYSE: BA) (10.14 percent), United Technologies Corporation (NYSE: UTX) (7.87 percent), Lockheed Martin Corporation (NYSE:
LMT) (7.37 percent), General Dynamics
Corporation (NYSE: GD) (6.4 percent), Raytheon
Company (NYSE: RTN) (6.19), and Northrup
Grumman Corporation (NYSE: NOC) (6.11
Getting Some Attention
While the technology sector has been grabbing most of the sector-level headlines this year, the industrial group is
performing admirably, thanks in large part to the aerospace and defense industry.
“For most of the last three years there’s been one consistent driver of the market: tech
stocks. While every other sector has faltered at various times, the Technology Select Sector is up about 44 percent over the past
three years, due in large part to the rally in large-cap stocks,” said Direxion
in a recent note.
The industrial sector is up about 16 percent year-to-date, putting it ahead of the S&P 500. As is the case with
any leveraged ETF, DFEN is a short-term trade, not a buy-and-hold investment, but it is noteworthy that the fund is up almost 68
percent since launching in the second quarter.
Plenty Of Catalysts
Home to a combined 19 percent weight to Dow components Boeing and UTX, DFEN makes for an ideal tool for short-term
traders as aerospace earnings season approaches. North Korea is also a gift that keeps on giving for DFEN traders.
“Fully 46 percent of Republicans — a plurality — said they would support a preemptive strike against North
Korea,” reports the
Washington Post, citing a Quinnipiac University
poll.
Some traders are preparing for the Trump Administration to continue talking tough about North Korea. Over the past
month, DFEN is averaging daily inflows of over $784,000, according to Direxion data.
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