Not many S&P 500 investors can say they've done better than Palantir Technologies stock this year. But some risk-seeking ETF investors can.
Shares of GraniteShares 2x Long PLTR Daily ETF returned 98.3% this year so far, says Morningstar Direct. That's a 60% higher return than the already impressive 62% gain by Palantir shares alone.
And GraniteShares 2x Long PLTR, which uses borrowed money to amp up returns in the single stock, is just one example of the surge in so-called leveraged ETFs this year. Leveraged plays on some single stocks, assets or countries are paying off as they bounce back from the April lows.
Four of the five top ETFs this year are single-asset leveraged plays. Two are linked to Palantir's shares. But not all leveraged ETFs are rallying to the same degree.
"Some single stock leveraged ETFs are soaring this year but others like those tied to Apple or Tesla are down sharply since those stocks have declined in value this year," said Todd Rosenbluth, director of research at TMX Vetta Fi. "The rewards can be greatly enhanced but so can the risks."
Leverage Pays Off In New Bull
With the fear of tariffs tabled for now, stocks are mounting a powerful recovery. Leverage is only amplifying this surge higher.
The Nasdaq entered a new bull market by gaining more than 20% from its April low. And the S&P 500 is up more than 17% in that time. With that said, the S&P 500 is still flat for the year. So it's only natural some investors might seek higher returns.
And single-asset leveraged ETFs can do that for some risk-ready investors. "Leveraged ETFs are best used by investors embracing volatility for short-term tactical purposes such as ahead of an earnings report," Rosenbluth said.
"If holding a leverage ETF for longer holding periods, the price will deviate from the target investment, and losses may be greater than expected. These are not for the faint of heart and should be a small slice of a portfolio, not the core."
Lots To Choose From Beyond S&P 500
Palantir stock isn't the only asset leveraged ETFs are doubling down on.
MicroSectors Gold Miners 3X Leveraged ETF is up more than 129% this year, Morningstar Direct says. That makes it the top ETF of the year so far — amping up the strong gain of gold this year. Unleveraged SPDR Gold Shares is up just 25% this year, on demand fanned by fears of inflation.
"Gold for many ETF investors is intended to be a diversifier offering a return profile different from the equity market," Rosenbluth said. "There are leveraged gold products but these are likely to be more volatile than a traditional gold investment."
And as long as investors look to add juice to their winners, expect more single-asset leveraged ETFs to launch.
"Leveraged ETFs have gained in popularity because they make it easier for investors to target the upside of a single company or an industry," Rosenbluth said. "There are over 100 single stock leveraged ETFs and we continue to see new products come to market."
Top ETFs This Year So Far
Many are single-asset leveraged plays
| Name | Ticker | YTD Return % |
|---|---|---|
| MicroSectors Gold Miners 3X Lvrgd ETN | GDXU | 129.0% |
| Lazard International Dynamic Equity | IEQ | 122.3 |
| GraniteShares 2x Long UBER Daily | UBRL | 106.8 |
| GraniteShares 2x Long PLTR Daily | PTIR | 98.3 |
| Direxion Daily PLTR Bull 2X | PLTU | 97.6 |
| Direxion Daily Jr Gold Miners Bull 2X | JNUG | 90.2 |
| Direxion Daily Gold Miners Bull 2X | NUGT | 89.7 |
| Direxion Dly MSCI Mexico Bull 3X Shs | MEXX | 87.3 |
| GraniteShares 2x Long BABA Daily | BABX | 86.0 |
| MicroSectors™ Gold 3X Leveraged ETN | SHNY | 73.1 |
