CWS: 1st Quarter 2021 Portfolio Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/etfs/cws.

Portfolio Review

The first quarter of 2021 was an important turning point for the stock market. It marked one year since the Covid pandemic broke out which has altered daily life across the globe. We also saw a new president inaugurated in Washington, DC.

For the stock market, we saw a key shift towards economic bullishness. On January 1, Wall Street was rather dour on its prospects for economic growth in 2021. But by April, the mood on Wall Street was decidedly more optimistic. There are a few important reasons for this.

For one, the Federal Reserve made it unambiguously clear that it will do whatever it requires to get the U.S. economy up and running. While this has led to an uptick in fears of inflation, so far, broad-based inflation hasn’t reappeared. The Federal Reserve plans to keep interest rates near zero. The central bank is also buying huge amounts of Treasury bonds and mortgage-backed securities. Fed Chairman Jerome Powell recently said that he expects to see very strong growth during the second half of this year.

The economy is also being helped by major fiscal stimulus efforts from the Biden administration. The president recently signed a $1.9 trillion economic aid plan. This has led to sharp increases in consumer spending and retail sales.

The major benefit for investors is that this has been a good time to in the market. While many companies are struggling in a difficult environment, we’re seeing the stocks in the AdvisorShares Focused Equity ETF (CWS) grow and thrive.

I’ll give you a few examples. During the Q4 earnings season, which ran from mid-January until mid-February, several of the companies we own reported very encouraging results. Wall Street has been expecting Disney (DIS) to report a loss of 42 cents per share. Instead, Disney reported a profit of 32 cents per share. The company’s streaming service has been a big hit.

When Disney+ was launched in November 2019, the company’s goal was to reach 60 million to 90 million subscribers by the end of fiscal 2024. Instead, Disney hit 100 million in March 2021. Contrast that with Netflix which took 10 years to hit 100 million.

Another company is our portfolio that’s done well for us has been Sherwin-Williams (SHW). In January, the paint people reported Q4 earnings of $5.09 per share. That easily beat Wall Street consensus of $4.85 per share. Sherwin also rewarded investors with a 3-for-1 stock split. In fact, the shares continued to rally after the stock split and recently touched a new all-time high.

Stryker (SYK) beat its Q4 earnings estimate by more than 10%. So did Silgan (SLGN). In fact, Silgan also helped investors by raising its dividend by 17%. This was the company’s 17th annual dividend increase in a row.

I’m pleased to say that for the first three months of this year, the traded shares of the AdvisorShares Focused Equity ETF (CWS) gained 2.17%, and the Net Asset Value (NAV) gained 2.54%. The ETF recently hit new all-time highs. The fund will celebrate its fifth birthday later this year.

What to expect for the rest of this year? So far, the major trends are pointing in the right direction. After a slow start, the vaccine rollout is gaining steam. Every day, millions of Americans are getting vaxxed. We’ve also seen major drops in the number of people getting Covid and the death rate has plunged significantly lower.

This will lead more people to go back to the malls and back to the office. Life, of course, won’t be exactly the same, but economy will thrive again. I don’t expect to see any major changes in Fed policy. The only possible trouble spot I see is a possible resurgence of inflation. I wouldn’t say it’s likely, but it’s something to watch out for. Overall, this is an excellent environment to be invested in the AdvisorShares Focused Equity ETF.

Top Holdings

Ticker Security Description Portfolio Weight %
MIDD MIDDLEBY CORP 4.93%
MLR MILLER INDUSTRIES INC/TENN 4.69%
AFL AFLAC INC 4.47%
SLGN SILGAN HOLDINGS INC 4.38%
ABT ABBOTT LABORATORIES 4.24%
TREX TREX COMPANY INC 4.20%
SCL STEPAN CO 4.14%
FISV FISERV INC 4.04%
HSY HERSHEY CO/THE 4.03%
MCO MOODY’S CORP 3.98%

As of 03.31.2021.

Management Fee

In a first for the ETF industry, the portfolio strategist of CWS has “skin in the game.” The strategist’s compensation is directly tied to portfolio’s performance. Using the trailing 12-month returns of CWS vs. its S&P 500 Index benchmark, stronger outperformance is rewarded with a larger management fee while weaker underperformance is penalized with a smaller management fee. The CWS fulcrum fee was 0.65% during March 2021. After the Fund’s March  performance, the CWS fulcrum fee will remain at 0.65% in April 2021.

 

Respectfully,

Eddy Elfenbein
Crossing Wall Street
AdvisorShares Focused Equity ETF (CWS) Portfolio Strategist

 

Past Commentary

Definitions:

The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks. One cannot invest directly in an index.

The ISM Manufacturing Index, which used to be called Purchasing Manager’s Index (PMI), measures manufacturing activity based on a monthly survey, conducted by Institute for Supply Management (ISM), of purchasing managers at more than 300 manufacturing firms.


Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the 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 prices of equity securities rise and fall daily. These price movements may result from factors affecting individual issuers, industries or the stock market as a whole. Shares of the Fund may trade above or below their net asset value (“NAV”). The trading price of the Fund’s shares may deviate significantly from their NAV during periods of market volatility. There can be no assurance that an active trading market for the Fund’s shares will develop or be maintained. In addition, equity markets tend to move in cycles which may cause stock prices to fall over short or extended periods of time. Other Fund risks include market risk, liquidity risk, large cap, mid cap, and small cap risk. Please see prospectus for details regarding risk.

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 to change.

The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.