Investment Snapshot: ProShares Short QQQ (PSQ)

Inverse Index (NASDAQ): 257 Million in Total Assets

Current Price: $40.84

FUNDAMENTALS:

PSQ is an index specifically designed to move in the opposite direction (Inverse) of the NASDAQ. Indexes like this are useful to those investors that believe the particular index that they are following has shown some form of weakness and will fall in price.

Trailing Total Returns (PSQ)
Market Return %
(as of 05/31/2017)
NAV Return %
(as of 05/31/2017)
Market Return %
(as of 03/31/2017)
NAV Return %
(as of 03/31/2017)
1-Month -3.77% -3.77% -1.97% -2.02%
3-Month -8.17% -8.22% -10.72% -8.22%
6-Month -17.46% -17.48% -11.26% -11.23%
Year-to-date -16.36% -16.46% -10.72% -10.82%
1-Year -23.66% -23.66% -19.71% -19.75%
3-Year -16.88% -16.88% -16.38% -16.38%
5-Year -18.63% -18.64% -16.27% -16.27%
10-Year -15.43% -15.41% -15.47% -15.47%
Since Inception -15.39% -15.39% -15.10% -15.10%

PSQ currently holds $279 Million dollars in assets and has a net expense ratio of 0.95%. It offers no regular dividends and is trading toward the bottom of the 52 week cycle ($28.81 – $53.32). This fund has been around since its inception in June of 2006 and has had the same fund manager since October 2013.

TECHNICALS:

On a 12 month daily chart PSQ ($40.84) is below the 100 ($41.45) and 200 day ($44.28) moving averages. It recently crossed above the 50 day SMA @ $40.15. The MACD and On Balance Volume (OBV) have shown significant upswings since early June. The RSI is leaning toward an overbought position, but is far from a critical level. PSQ appears to have hit bottom around $39 a share in the early weeks of June as well.

DISCUSSION:

The NASDAQ tracks technology sectors and has done very well over the last several years. Since PSQ is an inverse representation of the NASDAQ, it shouldn’t surprise anyone that the PSQ has had a very poor showing during this same time period.

Do not let any of this scare you off, as I believe the PSQ is a fantastic pickup at this price. The NASDAQ and tech sectors are overvalued and showing weakness. Generally speaking when the market corrects, the NASDAQ weakness is often a precursor. The market is due for a reasonable to significant correction, and I am looking forward to it. Why? When the markets are this expensive on a fundamental basis, they become unstable and thus more volatile. This volatility causes panic, fear and ultimately greed in the markets and generally this is the place that a correction will occur, and bargains are to be had.

The savvy investor will recognize these signals and put a hedge on and ride it out. When the market corrects, they will have cash available to start buying again when the market is much cheaper. Basically this is a technique of riding the market on the way down (and making money) and cashing it in on or near the bottom with the intent to buy back into the market when it regains strength.

Ordinarily I would not consider purchasing an index fund of 95 basis points (0.95% fee), but there are exceptions to the rule. Currently I have almost 20% in cash and other hedges anticipating a market correction in the next 3-6 months. I anticipate taking more profit from my winners and hedging even more over the next several weeks to months. I bought PSQ @ $39.77 and may add to it if and when the stock market shows significantly more weakness.

I am not telling anyone to buy this or any stock I discuss in this blog, this is simply a vehicle for me to share my thoughts. The stock market can be extremely volatile, and is not suitable for most investors. Do your own homework and invest at your own risk.

 

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