Even investors that paid slight attention to investment factors over the past few years know one simple truth: Growth is crushing value. Over the past three years, Russell 1000 Growth Index is higher by 65.5% while its value counterpart is up a paltry 7%.
That's in the past, but investors have a new avenue for amplifying the growth factor courtesy of the Direxion High Growth ETF (NYSE: HIPR). HIPR, which debuted earlier this month, follows the Russell 1000 Hyper Growth Index.
That benchmark and HIPR itself offer investors a refreshed approach to indexing beloved growth stocks.
“The Direxion High Growth ETF looks for consistent and sustainable growth by integrating historical sales growth with estimated earnings and cash flow growth,” according to the issuer. “At the same time, the fund tilts toward companies with positive momentum and high-quality characteristics, and aims to neutralize exposure to those that may be overvalued and volatile.”
Why It's Important
What makes HIPR relevant is that it's not just a growth ETF. It's actually a multi-factor fund due to the inclusion of momentum and quality.
“The trifecta of growth, momentum and quality factors may offer a good combination for growth investors to consider to position their portfolios over the medium term,” said Direxion managing director David Mazza in a recent note. “This multi-factor approach can help investors navigate an uncertain market as it focuses on companies with the potential for future growth while weeding out those that have not realized their growth potential.”
Importantly, HIPR features an emphasis on cash flow, something that's not featured with many traditional growth strategies.
“The multi-factor Russell 1000 Hyper Growth Index offers a different lens on large-cap growth, beginning with the US large-cap universe and selecting companies that offer consistent and sustainable growth while neutralizing exposure to volatility,” said FTSE Russell senior research analyst Ross French in the note. “The new Index is designed to capture cash flow growth as well as standard growth metrics, which means it measures companies with higher quality growth, positioned to continue to grow in the future.”
Past performance isn't a guarantee of future returns, but FTSE Russell ran the numbers and, over the past 16 years, HIPR's index easily outpaced the more traditional Russell 1000 Growth Index.
As for what constitutes “hyper growth” at the sector level, HIPR devotes about 71% of its combined weight to technology, communication services and consumer cyclical stocks.
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