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Is SOXL Stock a Solid Long Term Investment?

Stock Market

Typically, when you think about purchasing shares of stock as a long-term investment, you're thinking about investing in a particular company, not an idea. However, the stock market is changing and in that ever-changing landscape, investors have learned that things may not always be as straightforward as they seem. As a matter of fact, it isn't really all that uncommon to see more and more stock options becoming available where investors have the opportunity to invest in something that is a bit more abstract. Certainly, you're still talking about a parent company that is responsible for the stock, but things aren't quite as cut-and-dried as they were 10 years ago. In reality, the landscape is a lot different than it was even five years ago. That fact is driven home when you look at stocks such as Direxion Daily Semiconductor 3X Bull Shares, traded publicly on the New York Stock Exchange as SOXL.

What Should You Know About This Stock?

If you're wondering what you need to know about this stock, you're not alone. A lot of people have been wondering about it lately and that has prompted some individuals to wonder whether or not it might be a solid option for a long-term investment. Before we get too far into that, let's look at some of the basics about this particular stock.Today, it's selling for $26.83 per share, down 4.85% from yesterday's trading. One of the more interesting things to note is that within just two hours of trading, the stock lost more than $2 of its worth on the stock market. The question is, why is this happening? It's also worth noting that there have been some fairly significant swings in this stock's value over the course of the last 52 weeks as well. As a matter of fact, its 52-week low is $25.86, while the 52-week high saw the stock selling for slightly more than $74, $74.21 to be exact.

Clearly, these are some significant changes and it's important to understand why this particular stock has been behaving in this manner before you invest in it. Purchasing a stock for almost $27 per share as a long-term investment option certainly isn't unheard of, but you don't want to spend any amount of money on these types of investments unless you can have at least a decent amount of certainty that they're actually going to make you money later on. The thing that makes long-term investments so tricky is that it's very difficult to accurately predict how a stock is going to behave a year from now. If you plan on holding onto a stock for even longer, such as three to five years, it becomes exponentially more difficult to make those accurate predictions. There are so many variables involved in whether a stock makes money or loses money that it can literally change in the blink of an eye, as evidenced here by the fact that this particular stock lost roughly $2 per share in only two hours of trading.

You might not think of $2 as being a significant amount, but the bigger issue is that if you're losing that much value so rapidly, how much further is the stock going to slide? If you're already seeing warning signs like this, you might want to stop and think twice before you decide to make an investment, especially if you're doing it as a long-term investment where so many things can have an adverse impact on the value of a particular stock. At the very least, you owe it to yourself to find out everything you can about this company and make the most educated decision possible.

Past Performance

The first thing that you're going to want to look at is the past performance of the stock. In this particular case, its past performance is actually rather encouraging. For example, investors have roughly 11 years of performance to look at and in that 11 years, the stock has historically done better than a lot of other types of stock that are similar. If you're looking for numbers to put with it all, it has outperformed similar types of stock by roughly 81% over the course of that 11 years. That's definitely something worth noting, and it's a potential advantage when you're thinking about investing in this particular stock in the long-term. Certainly, individuals who chose to invest in it as a long-term investment all those years ago would be happy with the amount of money they could stand to make had they sold the stock after holding on to it for several years.

If you want to examine things even further, you can take those 11 years of past performances and pick them apart, one by one. In seven of those years, the stock performed exceedingly well, outperforming virtually every other stock of its type that was being publicly traded. In the other four years, it didn't perform as well but it still remained in the top five and in most cases, it was in the top three. That's definitely something to be considered if you're thinking about investing in it yourself. The question is, why did a stock that has traditionally performed so well take such an enormous tumble that it lost $2 of its value in only a two-hour time span? That's something that has to be addressed before you can make any type of decision. Otherwise, you're not really making an educated decision, but instead simply picking a stock out of thin air and hoping that you don't end up losing your shirt in the process.

Potential Problems

One of the potential problems with this particular stock is the fact that they have been trying to give their investors roughly three times more value than any other stock of its type. In other words, this particular stock and the individuals behind it have set out to ensure that investors make more money from this particular semiconductor than any other entity of its type that is currently out there and being traded publicly. That is an ambitious goal, to say the least. It's also one that some stock market analysts believe set the company up for failure. Even if it's successful, it's difficult to provide that kind of return on an investment. In short, a lot of stock market analysts have become weary of the stock because they're not entirely certain that the company behind it is going to be able to deliver.

If they can't, then there is every chance that the overwhelming majority of current stockholders will sell off their shares of stock in order to get out with as much money as they can and that in turn causes the stock to plummet. While this hasn't happened yet, the fact that the stock declined by roughly $2 in a two-hour time span on a single day of trading definitely makes people wonder if something like this is about to happen. If it is, you don't really want to be the person that's purchasing numerous shares of stock as a long-term investment while virtually everyone else is deciding to sell their shares, unless you have a plan. That means that you have to answer another question. Is the stock capable of recovering in a major way or is it only going to continue to decline? The answer to this question will determine whether or not you decide to purchase shares as a long-term investment.

Finding the Right Answers

If you're going to invest in the stock, you have to have some type of reasonable belief that it's going to be able to recover from any downward trend that it might be currently experiencing and recover so that you can then sell shares of the stock at a later date and make money. Is there a chance that a number of shareholders could potentially decide to sell off their shares of stock in the near future? If you look at the current trading trend, it seems that there is every chance that this could happen. As a matter of fact, some people might even say that it's likely to happen. If it does, there's a better-than-average chance that the price of the stock will plummet and that opens the door for potential investors to purchase several shares of stock for next to nothing. That's all well and good, provided that the stock recovers at some point in the future and the value goes back up. The question is, will it be able to recover or will it plummet and then remain largely unchanged moving forward? Many stock market analysts believe that this stock has more or less seen its peak performance in the past.

Despite the fact that the stock has performed very well for a number of years, a lot of these analysts believe that it's starting to show some cracks in the armor and that it may not be able to recover significantly. If that happens, you're essentially stuck with several shares of stock that aren't worth very much. Furthermore, you're likely to be stuck with them indefinitely because it's highly unlikely that you'll be able to sell them off if things don't go well for the company. If you take it a little bit further and look at a worst case scenario, you could potentially end up investing in a number of shares of stock and then losing every bit of the money you spent on purchasing these shares. Granted, that is a risk you take with every stock that you invest in, but that doesn't mean that you should invest recklessly. The stock market is risky enough on its own. You certainly don't need to indulge in risky investments unless you see something that makes you believe that there is a potential for significant profit. In other words, high-risk needs to come with a potentially higher return on your investment. Otherwise, you're not doing yourself any favors by investing in the stock to begin with.

The Potential for Success

Of course, not all stock market analysts believe that this particular stock is going to fail in spectacular fashion. As a matter of fact, some of them believe that there is the potential for it to succeed. After all, this is one of the most groundbreaking stocks to ever come along and they do have a proven track record. It's obvious that they know how to remain viable in a world where many companies of a similar nature have gone by the wayside. That being said, it does look like things are changing for the company, and not necessarily for the better. In order for them to remain viable, they're going to have to change with the times and it doesn't look like they are doing that as of yet. That could be the difference between investing in a stock that far exceeds what anyone thinks it will be able to do in the future or one that completely tanks.

Unfortunately, it's very difficult to predict with any high level of accuracy what this particular stock is going to do based on the information that's currently available. The company has had downturns in the stock's value in the past, but not anything quite as significant as what they're currently experiencing. That has investors' wondering and many stock market analysts have made the decision that this is not a stock that is worth purchasing in any capacity, much less as a long-term investment. There's no doubt that you'll have to make your own decisions here. The idea is to get as much information as you can so you at least know what you're potentially getting into when you make your decision. If you're looking for advice that tells you what to do one way or the other, it's important to realize that there are other stocks out there that you can currently purchase for less that have a bigger potential to make money later on. If you're looking to keep your risk as low as possible, this is probably not the stock that you want to be looking at right now.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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