Bull vs. Bear: Playing Earnings Season With Single-Stock ETFs

Bull vs. Bear is a weekly feature where the VettaFi writers’ room takes opposite sides for a debate on controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play at either angle. For this edition of Bull vs. Bear, James Comtois, and Elle Caruso discussed the pros and cons of using single-stock ETFs to express opinions on stock earnings.

James Comtois, staff writer, VettaFi: Ahoy, Elle! We’re soon approaching the first anniversary of AXS Investments launching the first single-stock ETFs. And with earnings season upon us, I think it’s high time we looked under the hood of this (relatively) new investment option.

Leveraged and inverse single-stock ETFs can allow short-term tactical investors to express an opinion on volatile stocks of high-profile companies (looking at you, Tesla (TSLA)). This makes these funds particularly appealing during earnings season when the market reacts to a company’s publicly released figures.

But they’re not just appealing during earnings: the current volatile investment environment is ripe for short-term tactical trading opportunities. Take, for example, inverse ETFs. So far this year, investors have pumped $5.8 billion into inverse ETFs. That’s roughly a quarter of inverse funds’ total assets at the start of 2023.

However, as bullish as I am on single-stock ETFs, these are not intended to be long-term holdings. I actually cannot stress this enough. Even issuers of these ETFs argue that they’re designed to be short-term trading tools for sophisticated traders.