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Can HND ETF Stock Price Outpace the S&P 500?


The Betapro Natural Gas Inverse Leveraged Daily Bear ETF (TSX:HND) has been in operation since January 15, 2008. The ETF aims to track the performance of the Horizons Natural Gas Rolling Futures Index. The index is meant to provide a benchmark that indicates the performance of the natural gas sector. 

Investors with a very high-risk exposure seeking out greater short-term returns than traditional investment strategies can consider buying the HND ETF, which offers a daily inverse leveraged exposure to natural gas

Source: CNBC

The HND ETF is listed on the Toronto Stock Exchange or the TSX. It is managed by a Canadian company called Horizons ETFs Management, and the fund has a management expense ratio of 1.4%. The ETF uses a leverage of 2x and is hence considered to be riskier than other ETFs that do not use leverage. 

The entire holdings of the HND ETF are in natural gas futures, providing investors access to a popular commodity. 

The ETF seeks daily investment returns (rather than returns over the long term). The aim of the fund is to correspond to the opposite of the price movements in natural gas futures. So, if natural gas prices move higher, the ETF will generate negative returns and vice versa. 

In this article, we’ll seek to compare the performance of the HND ETF with that of the S&P 500, one of the most popular indices in the world. 

What is the price of the HND ETF on the TSX?

Over the past year, the S&P 500 has declined by 9% due to a variety of macroeconomic challenges that include rising interest rates and red-hot inflation numbers. 

The economic recovery after the COVID-19 pandemic was rather shortlived as the steep valuations of stocks across sectors unimpressed investors.  

The S&P 500 index briefly entered the bear market territory in June 2022 and has since managed to recover a portion of these losses. 

In comparison, the HND ETF price has fallen by 44% in the last year and is down over 50% in 2022. A major reason for the decline in the stock price of the HND ETF is the rising prices of natural gas globally. 

The reopening of economies and the supply glut caused due to the Russia-Ukraine war have driven natural gas prices significantly higher in the last year. 

Should you buy HND ETF or the S&P 500 ETF?

Investing in the HND ETF carries significant risks as it is a leveraged fund. Due to the cyclical nature of commodities, it is essential for investors to time the market, which is extremely difficult. While the global economy is expecting a recession, geopolitical tensions between the Western Bloc and Russia will continue to weigh heavily on natural gas pieces. 

The HND ETF is not a conventional fund in the sense that it is leveraged and only invests in futures. Comparatively, the S&P 500 offers a much better risk-reward profile for long-term investors.

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