ULTY: Small-Mid Cap Opportunistic Buy And Wise Reinvest

seekingalpha07-16

Small-cap stocks outperformed large-cap stocks last week, with potential for a significant recovery in 2024. It is a good time to buy ULTY with its small-cap bias.ULTY ETF focuses on derivative income...

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It is a good time to buy ULTY with its small-cap bias.ULTY ETF focuses on derivative income...</p>\n\n<a href=\"https://seekingalpha.com/article/4704207-ulty-small-mid-cap-opportunistic-buy-and-wise-reinvest\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>ULTY: Small-Mid Cap Opportunistic Buy And Wise Reinvest</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nULTY: Small-Mid Cap Opportunistic Buy And Wise Reinvest\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-07-16 12:39 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4704207-ulty-small-mid-cap-opportunistic-buy-and-wise-reinvest><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Small-cap stocks outperformed large-cap stocks last week, with potential for a significant recovery in 2024. It is a good time to buy ULTY with its small-cap bias.ULTY ETF focuses on derivative income...</p>\n\n<a href=\"https://seekingalpha.com/article/4704207-ulty-small-mid-cap-opportunistic-buy-and-wise-reinvest\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"ULTY","symbol_name":"YIELDMAX ULTRA OPTION INCOME STRATEGY ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4704207-ulty-small-mid-cap-opportunistic-buy-and-wise-reinvest","article_id":"2451930593","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1301406955/image_1301406955.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2451930593","pubTimestamp":1721104751,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"EonerenIntroduction Small-Cap stocks have outperformed large-cap stocks last week and some headlines even called it a \"revenge\". It is now highly expected that the FED rate-cut could provide a real ca","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"ULTY":"YIELDMAX ULTRA OPTION INCOME STRATEGY ETF","XSMO":"Invesco S&P SmallCap Momentum ETF","BK4585":"ETF&股票定投概念","FDN":"First Trust Dow Jones Internet I","BK4588":"碎股","BK4550":"红杉资本持仓"},"translate_title":"ULTY：中小型股机会主义买入和明智的再投资","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"US3Y.BOND":0.6,"XSMO":0.6,"US912797HE00.BOND":0.6,"US912797GW17.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GB79.BOND":0.6,"US7Y.BOND":0.6,"US6M.BOND":0.6,"US5Y.BOND":0.6,"US30Y.BOND":0.6,"US2Y.BOND":0.6,"US12M.BOND":0.6,"US10Y.BOND":0.6,"ULTY":0.6,"FDN":0.6},"content_text":"Small-cap stocks outperformed large-cap stocks last week, with potential for a significant recovery in 2024. It is a good time to buy ULTY with its small-cap bias.ULTY ETF focuses on derivative income from high volatility stocks, offering a monthly dividend of (estimated) 96% from selling covered calls.Consider investing ULTY dividends in a small-cap growth ETF like XSMO for potential outperformance and reduced volatility risk.   EonerenIntroduction Small-Cap stocks have outperformed large-cap stocks last week and some headlines even called it a \"revenge\". It is now highly expected that the FED rate-cut could provide a real catalyst to small-cap market, and small-cap market stage a sizeable rebound in the rest of 2024. YieldMax Ultra Option Income Strategy ETF(NYSEARCA:ULTY) provides a smart way to capture the opportunities for small-cap recovery, because of its bias toward smaller growth companies in the portfolio. ULTY offers an huge monthly dividend with a distribution rate estimated at 96%. The huge dividends can be used to create a \"wise growth engine\" by reinvesting them in top-performing small-cap ETFs. The combined investment should offer performance advantages in total return over the approach that would reinvest the dividends in ULTY itself. ULTY ETF Highlight ULTY is an actively managed ETF from YieldMax, focusing on the derivatives (covered calls) income from the selected stocks, which are typically with ultra high volatility. The following official description shows the ETF's objectives that seek monthly income from a portfolio of covered call strategies, each on an Underlying Security. ULTY also provides direct or indirect exposure to the share price returns of the Underlying Securities, subject to a limit on potential investment gains for each such security. The following shows the top holdings in current ULTY portfolio. Excluding the cash types (the top entry and the bottom entry in the table), there are 19 equity holdings, which were started with equal weights. Note that 19 is the minimum number of the holdings that can still be viewed as diversified portfolio under the equal-weight structure. ULTY Holdings from YieldMaxMorningStar.com shows that ULTY portfolio is mapped towards between Small-Mid Cap and Growth category.   ULTY Style from morningstar.comULTY is designed to retrieve the ultra monthly income from selling the covered calls of the underlying stocks in the portfolio. The following shows the current list of the covered calls being sold: ULTY Holdings of Covered calls from YieldMaxNotice that the call options are mostly weekly options, indicating that the option premium can be collected on a weekly basis and they are sustainable due to the high demand on the week time-scale. Two call options listed on the top are monthly options. The monthly availability typically shows less demand than the weekly availability. The fund is really new, as it was incepted 5 months ago on February 28, 2024, and its dividend yield can only be estimated at the moment. Currently a distribution rate of 96.35% is provided by the fund's official site. This is perhaps the most attractive feature of the ETF to the income investors. Keep in mind that the yield rate is highly dependable on the volatility and the call option sales, so the actual yield may vary from time to time. It is also interesting to notice that ULTY has AUM of $190.68M for less than 5 months and a substantial volume of 1,705,124 as of last trading day, indicating the increasing popularity of the fund. The ETF charges a fee with a 1.14% Expense Ratio, which is a bit higher than 0.99% for the other individual YieldMax ETFs, because more option trading activities are needed to obtain the premiums. Small-cap market is expected to stage a remarkable rebound. I think small-cap stocks are about to experience a meaningful rebound. So far in 2024, despite small-cap Russell 2000 Index is doing fine in numbers (up over 16%), it is lagging the big-cap market S&P 500 by about 10 percentage points, as pointed out by a recent article from kiplinger.com \"So far in 2024, small-cap stocks have lagged larger stocks due to delays in the Federal Reserve's anticipated interest rate cuts. Smaller companies rely more so on debt than large-cap stocks do.\" In fact small-cap stocks have been suffering for last three years under the high-rate policy deployed to fight against the high inflation. I believe that the interest rate cut is increasingly possible as the FED may have to deal with the slowing US economy very soon. As reported by SA, \"Odds of September rate cut surge to nearly 90% as inflation cools faster than expected\". Therefore the small-cap stocks are in the right spot for a recovery run to make up 3-year losses potentially. ULTY has collected a few small-cap growth stocks in its portfolio. The following shows the list of constituents with a market cap up to $12.1B. They account for about 61% of the portfolio.   ULTY Smaller Cap holdings compiled by AuthorI expect these stocks to be the front-running beneficiaries for the upcoming rate cuts. Hence ULTY is positioned well for the potential small-cap market rally. The following chart shows the price behavior since the last time ULTY issued the distribution. It can be seen that ULTY is doing better than large-cap QQQ during this short time period, thanks to the late surge of the small-cap market. The small-cap performance is more clearly illustrated by Russell 2000 small-cap index IWM, which is performing the best among the three highlighted in the chart. ULTY Stock Price since last distribution from SA Use ULTY Income to funnel a small-cap growth engine. Collecting the big dividend income from ULTY is exciting. However, I think what is even more exciting is finding a wise way to increase wealth by utilizing the huge dividends. The following provides some ideas for consideration:  Cash out all the dividend. The upside potential is left to the original invested capital (in ULTY shares). Note that the price gain will likely be very limited due to the price-capping effect (AKA price erosion) that many investors are concerned about. In other words, selling of covered calls will limit the upward potential of ULTY's stock price. However this approach does practically offer a tool that allows investors to test the small-cap water. It is an interesting element considering that we are yet to see the true tailwind of the rate-cut to be in place. The unrecovered ULTY price would offer a \"live\" evidence to prove that a meaningful recovery is not really on the way. Therefore taking dividend (profit) off is not such a bad idea. Simply reinvest the distribution back in ULTY. It requires minimum effort. and It'll continue to ride the wave of the small-cap rebound as it happens. This approach will still be subject to the capped-upside effects. However the total return is maintained due to the added capital in more ULTY shares. My preferred 'wise' approach is to invest the dividends in one of the best-performing small-cap ETFs. More details will be given below about the ETF. The selected ETF will not have the price-capping limitation, and will be able to take the full advantage of any price rebounding.  My favorite \"wise\" choice for the small-cap ETF currently is Invesco S&P SmallCap Momentum ETF(XSMO). XSMO has 117 holdings that is more than ULTY's total. So the volatility risk is much lower. XSMO has AUM of $533.50M. The most recent daily-volume was 267,821. The following is its growth metrics:   XSMO Growth Metrics from marketchameleon.com The 3-year and 5-year stats show great growth fundamentals for the ETF. With most growth metrics in double digits, XSMO is well prepared for the future small-cap recovery. XSMO is a highly rated ETF, as shown below, XSMO is receiving a BUY from SA Quant Rating and A grade in Momentum SA XSMO Rating Information from SAXSMO also has a top 5-star rating from Morningstar and it is tilted towards the small-cap and growth as shown below: XSMO Information from morningstar.com I view XSMO a great compliment to ULTY in the portfolio. XSMO offers over 100 small-cap stocks to the mix, with a top-rated quality. The existing holdings in ULTY still maintain the good exposures to the fast growth opportunities through the underlings such as TSLA, AMD and ARM. With the income cash reinvested to the growth engine such as XSMO, I expect the combo to outperform the alternative solution that only reinvests 100% in ULTY. I call it \"Wise Growth Engine\". To build such a small-cap growth engine, I suggest buying ULTY and using its ultra monthly income to purchase XSMO shares. Risks & Caveats ULTY is an opportunistic buy for the anticipated small-cap market rally. It is possible that the rally may be short-lived. The FED's rate-cut remains unconfirmed so far. The rally won't last too long based on speculation alone. It is worth noting that there could be a thin line between the cut for rate-adjustment and the cut for anti-recession, the latter would mean a rather bad economy, e.g. a recession, which could spell a real trouble for the small-cap businesses. The small-cap ETF XSMO could perform poorly in such environment. ULTY holdings are chosen because of the high volatility, which makes the portfolio inherently risky. The chances of seeing big price drop are high. This is one of the reasons why reinvesting back to ULTY could perform badly compared to reinvesting in the other ETFs. Closing Thoughts  ULTY has not done too well so far in its 5-month short history. This is largely due to the relative underperformance from small-cap and mid-cap underlying stocks in the portfolio. With the turnaround of sentiment toward small-cap market and the increased hope for FED's rate-cut, small-cap stocks are expected to do well in the near future. ULTY with its bias on small-cap exposures would also be positioned well to take such an advantage. ULTY is a wise buy for its 96% dividend which should be used to reinvest in top small-cap ETFs such as XSMO and maximize the portfolio alpha.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2451930593"}