HDGE: 4th Quarter 2024 Portfolio Review
Performance
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| SYNA | SYNAPTICS INC | -4.03% |
| BRZE | BRAZE INC-A | -2.65% |
| HUM | HUMANA INC | -2.14% |
| MEOH | METHANEX CORP | -2.11% |
| WK | WORKIVA INC | -2.08% |
| ODP | ODP CORP/THE | -1.92% |
| ALGM | ALLEGRO MICROSYSTEMS INC | -1.85% |
| IPGP | IPG PHOTONICS CORP | -1.84% |
| ULTA | ULTA BEAUTY INC | -1.84% |
| NTST | NETSTREIT CORP | -1.79% |
As of 12.31.2024. Cash not included. Holdings subject to change.
Markets Review
The fund continues to maintain an aggressive short position. We expect to maintain an aggressive short position given our views on market valuation and breadth. In our view, the markets are richly valued across a multitude of metrics. As the chart below shows, forward yields on the S&P 500 combined with dividend yields have fallen sharply to among the lowest levels this century. Furthermore, when compared to 10-Year Bonds, the spread has experienced a precipitous decline. Competition from bonds may cause investors to pull back from risk assets in the future. As a result, stock prices may experience a bumpy period in the coming months.
As of 01.01.2025. Source: Ranger Alternative Management; Factset. Past performance is no guarantee of future results. You cannot invest directly in a market index
Across measures of forward and cyclically adjusted price / earning ratios, asset replacement, and market value to GDP among others, the market is priced near the highest levels of the past 100 years.
As of 01.02.2025. Source: Bloomberg.
Meanwhile, the recent rally in stocks has been accompanied by poor breadth. This is a cause of concern for us because as the market has trended higher, fewer stocks are participating in the rally. This divergence is a major red flag, in our opinion. As the chart below shows, as the Nasdaq Composite hits recent 3-year highs, the number of stocks up on the day is below 40%. Meanwhile, more stocks are hitting new 52-week lows and highs. This poor breadth is masking deterioration underneath the indexes. Historically, the median return 12-months after these conditions have occurred is negative 16.9%.
Source: SentimentTrader.com Past performance is no guarantee of future results. You cannot invest directly in a market index
Given these conditions and recent warning signs, we expect to maintain an aggressive short position in smaller / medium-sized “growth” stocks.
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- Trailing P/E (price to earnings) ratio is calculated by dividing the current market value, or share price, by the earnings per share over the previous 12 months and is based on actual performance statistics.
- Forward P/E (price to earnings) ratio estimates a company’s likely earnings per share for the next 12 months and is based on performance estimates.
- CAPE (cyclically adjusted price-to-earnings) ratio is a valuation measure that uses real earnings per share over a 10-year period to smooth out fluctuations in corporate profits that occur over different periods of a business cycle. it is also know as the Shiller P.E ratio.
- P/B (price to book) ratio is the company’s current stock price per share divided by its book value per share and shows the market valuation of a company compared to its book value
- Ev/EBITDA is the ratio of enterprise value to earnings before interest, taxes, depreciation, and amortization. It compares the value of a company—debt included—to the company’s cash earnings minus non-cash expenses. Enterprise value measures a company’s total value and includes the market capitalization of a company as well as short-term and long-term debt, and any cash or cash equivalents on the company’s balance sheet. EBITDA is calculated by adding interest, tax, depreciation, and amortization expenses to net income.
- Q Ratio is a valuation method that divides the market value of a company by the replacement value of the firm’s assets.
- Mkt Cap to GDP is the stock market capitalization to gross domestic product ratio and is used to determine whether an overall market is undervalued or overvalued compared to a historical average.
Respectfully,
Brad Lamensdorf Jon DelVecchio
Ranger Alternative Management
AdvisorShares Ranger Equity Bear ETF (HDGE) Co-Portfolio Managers
Past Commentary
Definitions:
The S&P 500 Index is a free-float capitalization-weighted index based on the common stock prices of 500 American companies. It is one of the most commonly followed equity indices and many consider it the best representation of the market and a bellwether for the U.S. economy.
A Bear Market (Bearish) is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.
A Bull Market (Bullish) is a financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.
The Dow Jones Industrial Average (DJIA) is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes.
The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges, excluding companies in the financial sector.
A short position is the sale of a borrowed investment with the expectation that it will decline in value.
Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.
Implied Volatility is the estimated volatility of a security’s price. In general, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets.
The Volatility Index (VIX) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant
to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX is a contrarian sentiment indicator that helps to determine when there is too much optimism or fear in the market.
Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus or summary prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.
There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. The Fund may invest in (or short) ETFs, ETNs and ETPs. In addition to the risks associated with such vehicles, investments, or reference assets in the case of ETNs, lack of liquidity can result in its value being more volatile than the underlying portfolio investment. Other Fund risks include market risk, equity risk, short sales and leverage risk, large cap risk, early closing risk, liquidity risk and trading risk. Short sales involve leverage because the Fund borrows securities and then sells them, effectively leveraging its assets. The use of leverage may magnify gains or losses for the Fund. See prospectus for specific risks and details.
Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.
Holdings and allocations are subject to risks and change.
The views in this commentary are those of the portfolio manager and many not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.