Two new Direxion ETFs, both launched December 8, 2011, try to give investors access to the stocks corporate insiders are accumulating. The Direxion All Cap Insider Sentiment Shares ETF (KNOW) is based on the Sabrient Multi-Cap Insider/Analyst Quant-Weighted Index and the Direxion Large Cap Insider Sentiment Shares ETF (INSD) is based on the Sabrient Large-Cap Insider/Analyst Quant-Weighted Index.
According to the company press release (pdf), the new ETFs use a verifiable, repeatable rules-based index approach. They select stocks by focusing on insider transactions and analyst ratings of public company filings to determine weightings.
Direxion All Cap Insider Sentiment Shares (KNOW) holds 100 stocks selected from the S&P 1500 Index. Top holdings as of 12/23/11 included Delphi Financial Group (DFG) 2.6%, Lincoln National (LNC) 2.5%, HollyFrontier (HFC) 2.4%, Gannett Co (GCI) 2.4%, and Smithfield Foods (SFD) 2.4%. The top sector allocations were Energy 24.0%, Financials 19.6%, Technology 14.8%, Consumer Discretionary 14.5%, and Consumer Staples 8.9%. Additional details are in the KNOW overview and fact sheet (pdf).
Direxion Large Cap Insider Sentiment Shares (INSD) holds 100 stocks from the S&P 500 Index. Top holdings as of 12/23/11 included Gannett Co (GCI) 2.6%, Lincoln National (LNC) 2.5%, Ameriprise Financial (AMP) 2.5%, Tyson Foods (TSN) 2.5%, and MetLife (MET) 2.4%. The largest sector allocations were Financials 22.1%, Energy 21.2%, Consumer Discretionary 17.4%, Industrials 11.3%, and Technology 9.0%. Additional details are located in the INSD overview and fact sheet (pdf).
The new ETFs have an expense cap of 0.65% and share a common prospectus (pdf). They face competition from one similar and two related products. Guggenheim Insider Sentiment (NFO) also uses a Sabrient index and selects its 100 holdings from among all US listed stocks. NFO follows an equal-weighted approach, has a 0.60% expense ratio, and has dramatically outperformed the market since inception five years ago.
Indirect competition will come from PowerShares Buyback Achievers (PKW) that buys stocks in which the company itself is buying its own shares. PKW has an expense ratio of 0.70% and is beating the S&P 500 with lower volatility. New entry AdvisorShares TrimTabs Float Shrink ETF (TTFS) is an actively managed ETF with a 0.99% expense ratio that buys stocks whose outstanding share quantity shrank over the past 120 days (float shrink).
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.