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Direxion Moonshot Innovators Spotlight

January 19, 2022
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Moonshot Money in Motion – MOON ETF

David Mazza, Managing Director, Head of Product

What Happened to Moonshots Stocks and the MOON ETF in 2021?

The S&P Kensho Moonshots Index measures the performance of 50 US, early-stage companies with the highest innovation allocation and sentiment. Innovation allocation represents the ratio of research and development expenses to revenue compared to other companies in the same industry. Innovation sentiment is based on a review of a company’s regulatory filings for the previous 12 months for the use of words related to innovation. These 50 companies produce the products and that have the potential to shape our future.

In 2021, innovation as a theme was out of favor, thanks to expectations of an improving economy and increased interest rates driving a rotation away from growth to value. Thematically, Virtual Reality was the top performing theme, followed by Robotics and Advanced Transportation Systems. Laggards included Cleantech, Digital Communities and Genetic Engineering.

For the full year, the S&P Kensho Moonshots Index declined nearly 15%. From a sub-industry perspective, overweights and security selection in Biotechnology was by far the greatest detractor from performance. At the stock level, Oneconnect Financial Technology Co., Ltd. (OCFT) down 87%, Workhorse Group Inc. (WKHS) down 78%, and ImmunityBio, Inc. (IBRX) down 54% were the largest laggards.

Moonshots Underperformed in 2021

One year performance chart comparison of the Moonshot Stock Index, S&P 500, NASDAQ 100 and Russell 2000

Source: Bloomberg Finance, L.P., as of December 31, 2021.

Moonshot Stocks: Out with the Old, In with the New

While 2021 was challenging for Moonshots stocks, the past is the past. Looking ahead, investors and traders should focus on what the current exposures are and how they may fare going forward. Fortunately, the S&P Kensho Moonshots Index employs a systematic approach to identifying the 50 most innovative early-stage companies. In December 2021, the Index underwent its most rebalance. Two of the recent additions – Gritstone bio, Inc. (GRTS) and A10 Networks Inc (ATEN) – are top 10 holdings.

The Moonshots Index Experienced 11 Additions and 11 Deletions

Additions in December 2021
NameTickerSub-ThemeGICS Sub-Industry
Gritstone bio, Inc.GRTSGenetic EngineeringBiotechnology
A10 Networks IncATENCyber SecuritySystems Software
Recursion Pharmaceuticals, Inc. Class ARXRXGenetic EngineeringBiotechnology
C3.ai, Inc. Class AAISmart FactoriesApplication Software
Butterfly Network, Inc. Class ABFLYDigital HealthHealth Care Equipment
Stem Inc.STEMSmart GridsElectrical Components & Equipment
Aeva Technologies, Inc.AEVAAutonomous VehiclesElectronic Equipment & Instruments
Ouster, Inc.OUSTAutonomous VehiclesElectronic Equipment & Instruments
TuSimple Holdings Inc. Class ATSPAutonomous VehiclesTrucking
View, Inc.VIEWSmart BuildingsBuilding Products
Canaan Inc.CANDistributed LedgerTechnology Hardware Storage & Peripherals
Deletions since June 2021
NameTickerSub-ThemeGICS Sub-Industry
MongoDB, Inc.MDB Internet Services & Infrastructure
Radware LtdRDWRCyber SecurityCommunications Equipment
Slack Technologies, Inc.-AWORKEnterprise CollaborationApplication Software
Aerovironment IncAVAVDronesAerospace & Defense
Mercury Systems IncMRCYDronesAerospace & Defense
Sohu.com Inc ADRSOHUDigital CommunitiesInteractive Media & Services
F5 Networks IncFFIVCyber SecurityCommunications Equipment
iRobot CorpIRBTRoboticsHousehold Appliances
Super League Gaming, Inc.SLGGDigital CommunitiesInteractive Media & Services
Orchard Therapeutics PLCORTXGenetic EngineeringBiotechnology
Xunlei Ltd.XNETDistributed LedgerApplication Software

Source: S&P Kensho, as of December 31, 2021.

With close to a 5% increase at the December rebalance, Genetic Engineering is the largest theme represented in the S&P Kensho Moonshots Index, with over 18% exposure. Autonomous Vehicles and Cyber Security are the second and third largest themes, respectively. Genetic Engineering, Smart Factories and Autonomous Vehicles saw the largest increases, while Drones, Digital Communities and Enterprise Collaboration experienced the greatest decreases.

At the sector level, Information Technology is the largest weight (45%), followed by Health Care (22%) and Industrials (22%). This level of turnover is consistent with expectations and the Index’s history.

Genetic Engineering Remains the Largest Moonshots Theme

Table containing sector level weights by theme for the S&P Kensho Moonshots Index

Source: S&P Kensho, as of December 31, 2021.

2022 MOON ETF Outlook

Looking toward 2022, Direxion Moonshot Innovators ETF performance will likely see macro factors, such as interest rates and inflation, drive performance, but the strategy’s tilt toward disruptive innovation remains attractive. One reason is simply a means to diversify away from the mega caps continuing to dominate the majority of indexes and certain active funds. Compared to the broader stock market, the S&P Kensho Moonshots Index skews toward smaller cap stocks with higher than average volatility and higher expected growth prospects1. At the end of the day, as these exposures go, Moonshots will go and so will the Direxion Moonshot Innovators ETF (Ticker: $MOON ETF).

Kensho Moonshots Index Top 10 Holdings

NameTickerSub-ThemeGICS Sub-IndustryWeight (%)
Arcturus Therapeutics Holdings Inc.ARCTGenetic EngineeringBiotechnology2.97
Gritstone bio, Inc.*GRTSGenetic EngineeringBiotechnology2.38
ProQR Therapeutics BVPRQRGenetic EngineeringBiotechnology2.36
Adaptimmune Therapeutics plc ADRADAPGenetic EngineeringBiotechnology2.36
ImmunityBio, IncIBRXGenetic EngineeringBiotechnology2.33
Juniper Networks IncJNPRCyber SecurityCommunications Equipment2.24
Netscout Systems IncNTCTCyber SecurityCommunications Equipment2.21
CRISPR Therapeutics AGCRSPGenetic EngineeringBiotechnology2.18
BIT Mining LimitedBTCMDistributed LedgerApplication Software2.16
A10 Networks Inc*ATENCyber SecuritySystems Software2.16

Source: Bloomberg Finance, L.P., as of December 31, 2021. *Denotes new addition in December 2021.  Holdings subject to change.

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