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Single-stock ETFs have been gaining immense popularity with the stock market surge and the big tech wave. Unlike traditional ETFs, which typically track a broad index or sector, single-stock ETFs provide exposure to the performance of one specific company by using derivatives. This allows investors to gain exposure to a particular stock without having to buy the stock directly. 

Single-stock ETFs tap the gambling mindset that exists in markets. There are around 96 single-stock ETFs on the market. Five firms, AXS, Direxion, YieldMax, GraniteShares and Innovator, provide all the single-stock ETFs currently available on the market. 

We have highlighted five single-stock ETFs that have outperformed the market in 2024. The solid trend is likely to continue in the New Year as well. 

T-REX 2X Long NVIDIA Daily Target ETF (NVDX - Free Report) ) – Up 429.7%

T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of the NVIDIA (NVDA). It has AUM of $665.9 million and an expense ratio of 1.05%. 

GraniteShares 2x Long TSLA Daily ETF (TSLR - Free Report) ) – Up 91.7%

GraniteShares 2x Long TSLA Daily ETF also seeks to offer two times (200%) the daily percentage change of the common stock of Tesla (TSLA), charging 95 bps in annual fees. It has managed assets worth $56.1 million in its asset base.

YieldMax META Option Income Strategy ETF (FBY - Free Report) ) – Up 50.8%

YieldMax META Option Income Strategy ETF is an actively managed fund that seeks to generate monthly income by selling/writing call options on Meta Platforms (META). Its strategy will cap its potential gains if META shares increase in value and subject to potential losses if META shares decrease in value, which may not be offset by income received by the Fund. YieldMax META Option Income Strategy ETF charges 99 bps in annual fees and has accumulated $154.9 million in its asset base. 

YieldMax PYPL Option Income Strategy ETF (PYPY - Free Report) ) – Up 50.7%

YieldMax PYPL Option Income Strategy ETF is an actively managed fund that seeks to generate monthly income by selling/writing call options on PayPal (PYPL). Its strategy will cap its potential gains if PYPL shares increase in value and is subject to potential losses if PYPL shares decrease in value, which may not be offset by income received by the Fund. YieldMax PYPL Option Income Strategy ETF has AUM of $57.9 million and charges 99 bps in annual fees.

YieldMax COIN Option Income Strategy ETF (CONY - Free Report) ) – Up 49%

YieldMax COIN Option Income Strategy ETF is an actively managed fund that seeks to generate monthly income by selling/writing call options on Coinbase (COIN). Its strategy will cap its potential gains if COIN shares increase in value and is subject to potential losses if COIN shares decrease in value, which may not be offset by income received by the Fund. YieldMax COIN Option Income Strategy ETF charges 99 bps in annual fees and has amassed $1.2 billion in its asset base.

More Gains Ahead?

These best-performing ETFs offer leveraged plays on the tech stocks, which are on the surge driven by an artificial intelligence (AI) boom. The expansion of AI applications holds the promise of ushering in fresh growth opportunities in the tech sector and beyond. The generative AI market is poised to explode at a CAGR of 42% to $1.3 trillion over the next 10 years from a market size of just $40 billion in 2022, according to a new report by Bloomberg Intelligence (BI). 

In particular, NVIDIA soared to incredible heights last month. Although the AI darling has shown some weakness in recent trading sessions, slipping into correction territory (down 10% from its recent peak), it is still up more than 170% this year. Most analysts believe NVIDIA will become far more valuable in the future due to its dominance in the billion-dollar AI chip market.

Tesla has been on a powerful rally, especially after Trump's election victory. After reclaiming the trillion-dollar market cap last month, shares of the electric vehicle maker are hitting a series of new all-time highs on Trump’s trade. Tesla shares are up nearly 40% in the past month as most analysts are bullish on the stock and have raised the price target. Trump’s administration will help expedite regulatory approval of the company's autonomous driving technology. 

Loosening autonomous driving rules from the incoming Trump administration, the repeal of consumer electric vehicle tax credits and a more profitable low-cost EV versus its peers will benefit Tesla in 2025 and beyond.

Meta Platforms hit a fresh high last week and gained 76% this year, while PayPal has been on a surge, gaining 48%. 

For COIN, the prospect looks bright as bitcoin has been on an unstoppable rally, driven by a wave of optimism from President-elect Donald Trump’s support for crypto.

Downside Risk to Single-Stock Investing

While single-stock ETFs offer a focused way to invest in a company, they come with significant risks due to their lack of diversification and exposure to the volatility of a single stock. They are typically more suited for experienced investors who understand and are willing to accept these risks. Here is the risk associated with these ETFs:

High Risk: If the specific company underperforms, investors could lose a substantial amount of money.

Lack of Diversification: One of the key principles of risk management in investing is diversification. Single-stock ETFs go against this principle, as they are invested entirely in one company.

Market Volatility: A single-stock ETF is subject to the volatility of the individual stock, which can be influenced by company-specific news and events.

Management Fees: While typically lower than mutual funds, ETFs still come with management fees, which can eat into your investment returns over time, especially in a narrowly focused fund like a single-stock ETF.

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