A Donald Trump rally in the stock market is becoming evident, with a number of top companies tied to the likes of Elon Musk (and other CEOs who have supported Trump, or in sectors the re-elected president is likely to support) surging over the course of the past week. However, I’d argue the Destiny Tech100 ETF (DXYZ) could be the preferable way to play this so-called “Trump trade.”
That’s because SpaceX is the Destiny Tech100’s largest holding. A private Elon Musk company focused on providing communications services to hard-to-reach places (a business model which involves launching rockets, which is inherently cool), this company is most notably…privately-traded. As such, investors looking for access to this particular company, and other privately-traded firms, don’t have many options when it comes to picking up shares.
The thing is, the Destiny Tech100 ETF is purposely-designed to give investors exposure to hard-to-access private companies. And given the fund’s disproportionate exposure to SpaceX, its valuation has notably been on a tear, rising more than 300% since Donald Trump’s election win.
Let’s dive into why investors may want to consider this the top ETF to buy in November.
Key Points About This Article:
- The Destiny Tech100 ETF is among the top exchange traded funds tracking private companies.
- This ETF’s exposure to SpaceX has led to incredible returns over the past week, and those returns could continue into the end of the year.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
What Is the DXYZ ETF?
Destiny Tech100 is a closed-end management investment company that focuses on investing in a carefully selected portfolio of the top 100 high-growth technology companies. Registered under the 1940 Act, this fund aims to provide everyday investors with access to venture-backed private technology firms that have been vetted by prominent U.S. institutional investors. To qualify for inclusion in the Destiny Tech100, companies must meet specific health metrics, and be considered along various quality grounds. Only very mature companies that late-stage venture capital investors would likely put capital into (such as SpaceX for example) are included in this fund.
That quality basis is what makes this particular ETF intriguing to me. Now, I don’t personally like Elon Musk, but I can understand that his vision when it comes to investing in companies in sectors that are forward-looking is extraordinary. Whether it’s SpaceX or Starlink, his privately-traded endeavors could one day be worth a lot more than his other more notable companies such as Tesla. That’s my view, anyhow.
But aside from employees in the company, getting one’s hands on such shares isn’t easy. And given the rather illiquid nature of the market for these shares, DXYZ is one ETF which has portrayed most volatility for most. It’s an extremely risky proposition for any investor, so this is the type of fund that ought to come with the “buyer beware” label front and center.
But for those looking to add some risk capital to a space with extraordinary upside over the coming months and years, this is a top option I think investors should look at in November.
Trump Victory Providing Plenty of Momentum
Following Donald Trump’s election win, a number of Trump-affiliated companies and industries (such as crypto) have seen incredible gains. Of course, the question many investors have is whether this momentum can be maintained. There are certainly arguments for and against the continuation of this momentum.
I’m of the view that this momentum will certainly tail off at some point, and profit-taking will bring stocks back toward an equilibrium level in the future. Just what that new equilibrium level is remains to be seen. And for rather illiquid stocks, such as those of privately-traded companies like SpaceX, valuation analysis becomes much more difficult. Many investors have pointed out to a rather incredible valuation premium for this ETF relative to privately-traded shares on other markets, but I think that speaks to the sheer demand for this type of exposure right now.
With this ETF surging as much as 35% in a single day over the past week, it’s clear that many investors continue to look for ways to ride this momentum higher. I do think November will likely be a very positive month for such funds, but as is the case with any investment, those looking to take advantage of this momentum will certainly want to employ strong risk management in their process.
Is This ETF Worth Owning Right Now?
In my view, there’s good reason why DXYZ has gained so much excitement as an investment in private tech giants, boosted by its popularity on Reddit’s WallStreetBets. The stock surged from $9 to $100 post-IPO, reaching a $550 million market cap, 10 times its net asset value. However, this volatility has also (rightly) raised concerns about its sustainability. U.S. investors seeking indirect private equity exposure may consider other ETF options.
However, DXYZ’s 40% surge last week highlights its volatility, with liquidity concerns and potential risks. While it could see growth by expanding its tech portfolio, the DXYZ ETF remains a highly speculative investment. I think those who are not seasoned investors may likely do best looking for other options in this market, thought this is a particular near-term trading vehicle that can be useful to many. Trade accordingly.
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