Riding The Bull Or Betting On The Bear: Direxion's 2X & -1X ETFs For Berkshire Hathaway And Palantir Traders

With approximately $48.5 billion in total assets under management as of September 2024, Direxion is a well-recognized asset manager in North America. Attaining such a size and stature has required ongoing product development and yearly enhancement of their ETF line-up.

Recently, Direxion launched two new offerings: The Direxion Daily BRKB Bull 2X and Bear 1X Shares (NASDAQ: BRKU and NASDAQ: BRKD and the Direxion Daily PLTR Bull 2X and Bear 1X Shares (NASDAQ: PLTU and NASDAQ: PLTD). These respective offerings provide investors access to different companies, each with distinct value propositions within the business landscape.

Direxion Daily BRKB Bull 2X And Bear 1X Shares

Berkshire Hathaway BRK is a well-known firm in American and global business due to the stewardship of Warren Buffett and Charlie Munger. It is the world's largest financial conglomerate holding company, with exposure to industries such as insurance, energy, railroads, manufacturing, retail, consumer products, financial services and technology. The company's most notable subsidiaries include GEICO Auto Insurance, Kraft Heinz, Duracell and Fruit of the Loom Companies. 

Given the role of Berkshire Hathaway within the American economy, the movement of the stock is significant, as it is considered by some to be a bellwether of the U.S. economy due to its cross-sectional exposure. Furthermore, as the firm has an extensive stock holding (i.e., Form 13F-HR: Quarterly report filed by institutional managers), actions taken by management in adding or reducing their allocations can materially impact and influence the market's outlook on these companies. Conversely, given the firm’s sizable equity holdings, adverse market movement in its positions can also be impactful.

With Buffett's long tenure at the firm, many investors and onlookers have ascribed much of the firm's value to him, while overlooking his long-standing investing ethos. With Munger’s recent passing, the idea of a successor has been a topic of conversation. Greg Abel, chairperson and CEO of Berkshire Hathaway Energy and vice-chair of non-insurance operations of Berkshire Hathaway, has been appointed as Buffett’s successor, but when he will assume the role is yet to be determined.

Direxion Daily PLTR Bull 2X And Bear 1X Shares

Palantir Technologies Inc. PLTR is a mission-driven firm that aims to utilize software to reduce terrorism while preserving civil liberties. The firm is the brainchild of Peter Thiel, the famed businessperson, entrepreneur and venture capitalist who has contributed to the success of companies such as Paypal PYPL and Meta Platforms (formerly Facebook) META.

Palantir’s value proposition differentiates it from other software-as-a-service companies, as it focuses on helping organizations integrate, manage and analyze large datasets to make informed decisions. Palantir's core offerings are Palantir Foundry, Palantir Gotham and Palantir Apollo. Foundry is designed for commercial clients, enabling them to centralize, clean and analyze data to drive operational and strategic decisions. 

Gotham is primarily used by government and defense clients, providing them with intelligence analysis and decision-making tools. With these tools, law enforcement and defense agencies can detect patterns in complex datasets, enabling them to potentially identify security threats. Finally, Apollo is Palantir's continuous deployment and software delivery platform, allowing customers to run Foundry and Gotham on multiple environments, including public cloud, private cloud and on-premise systems.

Palantir's business model focuses on enterprise and government agencies, often locking in multi-year contracts worth millions. The singularity of Palantir's offering can also make switching costs exceptionally high for clients; as such, their relationships with their clients are typically long-tenured.

Palantir's success is highly predicated on its relationship with government agencies; as such, there may be a client concentration risk present. Market sentiment around the firm is also mixed. With President-elect Donald Trump set for a second, non-consecutive term, the firm's stock has risen sharply, given management's strong relationship with the incoming administration. However, Palantir has also faced backlash regarding how its technology has been used for surveillance.

Gaining Comprehensive Exposure To Berkshire Hathaway And Palantir

For investors looking to gain comprehensive leveraged or inverse exposure to the Class B shares of Berkshire Hathaway, the Direxion Daily BRKB Bull 2X and Bear 1X Shares BRKUBRKD respectively)) provide daily 200% (Bull) or -100% or inverse (Bear) exposure, before fees and expenses. Alternatively, the Direxion Daily PLTR Bull 2X and Bear 1X Shares PLTUPLTD respectively)) offer daily 200% (Bull) or -100% or inverse (Bear) exposure, before fees and expenses, to Palantir. These leveraged or inverse ETFs are designed to amplify or seek inverse exposure to the firm's equity movements. 

Whether bullish or bearish on the current actions and future prospects of these companies, these ETFs present an alternative opportunity to engage with the corporations. However, it’s crucial to approach these leveraged or inverse products with a clear understanding of their risks. While the amplified or inverse exposure can translate to significant gains, it can also lead to substantial losses. These ETFs are best suited for those who can actively manage the inherent risks of leverage or inverse investing and are looking to capitalize on short-term trends occurring with the firm. As such, these leveraged or inverse ETFs should not be held for more than a day.

Featured photo by Sean Pollock on Unsplash

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 An investor should carefully consider a Fund's investment objective, risks, charges, and expenses before investing. A Fund's prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund's prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund's prospectus and summary prospectus should be read carefully before investing.

Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund's investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.

Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund's correlation with BRK.B and may increase the volatility of the Bull Fund.

Daily Correlation Risk – A number of factors may affect the Bull Fund's ability to achieve a high degree of correlation with BRK.B and therefore achieve its daily leveraged investment objective. The Bull Fund's exposure to BRK.B is impacted by BRK.B's movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to BRK.B at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to BRK.B increases on days when BRK.B is volatile near the close of the trading day.

Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund's ability to achieve a high degree of inverse correlation with BRK.B and therefore achieve its daily inverse investment objective. The Bear Fund's exposure to BRK.B is impacted by BRK.B's movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to BRK.B at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to BRK.B increases on days when BRK.B is volatile near the close of the trading day.

Berkshire Hathaway Inc. – BRK.B faces risks associated with the risks associated with companies in the financial services sector and the insurance industry. Additionally, Berkshire Hathaway Inc. faces risks associated with: terrorism impacting its operating businesses; cybersecurity events; geopolitical events that cause loses to its business and the value of securities it owns.

Financials Sector Risk —Performance of companies in the financials sector may be materially impacted by many factors, including but not limited to, government regulations, economic conditions, credit rating downgrades, changes in interest rates and decreased liquidity in credit markets.

Daily Correlation Risk – A number of factors may affect the Bull Fund's ability to achieve a high degree of correlation with PLTR and therefore achieve its daily leveraged investment objective. The Bull Fund's exposure to PLTR is impacted by PLTR's movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to PLTR at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to PLTR increases on days when PLTR is volatile near the close of the trading day.

Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund's ability to achieve a high degree of inverse correlation with PLTR and therefore achieve its daily inverse investment objective. The Bear Fund's exposure to PLTR is impacted by PLTR's movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to PLTR at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to PLTR increases on days when PLTR is volatile near the close of the trading day.

Palantir Technologies Inc. Investing Risk – Palantir Technologies Inc. faces risks associated with: a limited number of customer accounts for a substantial portion of its revenue; the development and deployment of new technologies; reliance on or capability with third-party products and services; the ability to hire, retain, train and motivate qualified personnel and senior management; sales and operations; intense competition; among other risks.

Information Technology Sector Risk — The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production cost.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily PLTR Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily BRKB Bear 1X Shares, Shorting or Inverse Risk.  Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

Distributor: ALPS Distributors, Inc.