The stock market has been in a tumultuous, volatile state lately — and one U.S. politician is betting that small-cap stocks will see the best returns going forward.
Finbold’s congressional trading radar recently picked up on an interesting Periodic Transaction Report. It reveals that Tim Moore, the Republican representative of North Carolina’s 14th congressional district, made significant investments in a leveraged small-cap stock exchange-traded fund (ETF).
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Moore spent up to $750k on this small-cap stock ETF
To be more precise, the April 14 filing shows that Moore purchased the Direxion Daily Small Cap Bull 3X ETF (TNA) eight times from March 3 to March 31. Since these disclosures use wide reporting ranges, the sum total value of his investments is between $310,008 and $750,000.
TNA is a 3x leveraged ETF that tracks the Russell 2000 index. In simple terms, that means that it utilizes derivatives to triple the daily moves of the index. If the Russell 2000 drops 1%, TNA drops 3%. Conversely, if the index rises by 1%, TNA rises by 3%.
How is this a bet on small-cap stocks? The Russell 2000 is made up of the 2,000 smallest stocks in the larger Russell 3000 index, which consists of 3,000 of the largest publicly held companies in the U.S. and serves as a benchmark for the entire stock market.
The filing contains several more interesting trades — it seems that Moore has continued day trading Ford stock (NYSE: F) and Harley-Davidson stock (NYSE: HOG), as well as investing in a Super Micro Computer ETF.
So, how has the trade fared thus far? Not good. The Russell 2000 is down 11.36% since Moore’s first purchase.
Russell 2000 6-month chart. Source: Google Finance
With that being said, since no sales were recorded, it’s quite possible that the congressman is applying a buy-and-hold strategy with the small-cap stock ETF. Since small-cap stocks exhibit higher volatility, they’re more likely to provide above-average returns in an upswing — so Moore might be buying into the weakness.
Source: Finbold / Digpu NewsTex