Direxion has added two more ETFs to its current suite of more than 50 leveraged and inverse funds and they target a very hot area of the market.
The Direxion Daily Cloud Computing Bull 2x Shares (CLDL) and the Direxion Daily Cloud Computing Bear 2x Shares (CLDS) deliver 200% and -200%, respectively, the performance of the Indxx USA Cloud Computing Index.
The index provider defines cloud computing to include three themes: Infrastructure as a service, Platform as a service and Software as a service. It includes domestic companies that deliver cloud computing infrastructure, platforms, or services. The companies included in the index are involved in the delivery of computing services – servers, storage, databases, networking, software, analytics, and more, over the internet.
The top 10 holdings include most of the predictable names, such as Salesforce, Workday and ServiceNow.
Cloud computing became a major theme of 2020 as the COVID pandemic and subsequent shutdown of the economy forced many individuals and companies to change the way they do business. People who went from working at the office to working from home and kids who needed to attend school virtually instead of in the classroom leaned heavily on cloud technology to adapt to the new way of life.
Basically, any company that operated within this new paradigm saw its stock deliver big gains in 2020. Cloud computing stocks were no exception. The best performing cloud ETF, the WisdomTree Cloud Computing ETF (WCLD) more than doubled in value last year.
Even if the coronavirus comes under control and we return to our past way of life, it seems likely that the way we conduct business has changed. The demand for cloud services will remain strong and this sector should remain in demand as well.
As with all other leveraged and inverse products, CLDL and CLDS are designed to deliver 200% and -200% of the daily performance of the index. The derivatives exposure resets at the end of each day and are generally not considered to be longer-term investments. Holding these and other leveraged funds for long-term periods could produce widely varying results compared to the index.