DBLV: 2nd Quarter 2022 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/dblv.

Market Review

People invest in stocks for two opposite reasons—in hope and confidence in the future of an enterprise or in fear that the value of their capital will be lost through inflation. — Bernard Baruch

 When inflation is low, you feel that you know more about the future, and are much more willing to take risks. — Peter Bernstein

 The intelligent investor is a realist who sells to optimists and buys from pessimists. — Benjamin Graham

U.S. equity markets posted a very gut-wrenching second quarter and first half of 2022.  After dropping -4.6% in the first quarter, the S&P 500 Index entered an accelerating downward spiral by falling another -16.1% in the second quarter.  The first half 2022 total negative return of -20.0% ranks as the worst first-half performance by that index since 1970, and puts the index back to December 2020 levels, as well as into bear market territory.  All 11 S&P 500 sectors posted negative returns in the quarter, with defensive areas like consumer staples and healthcare, as well as late cycle industries like energy, outperforming on a relative basis growth-oriented segments like consumer discretionary or technology.  Indeed, the Russell 1000 Growth Index again posted returns that were relatively worse than the aggregate indexes, at -20.9% in the quarter and -28.1% in the first half.  In contrast, the Russell 1000 Value Index posted relatively better results of -12.2% in the quarter and -12.9% in the first half.  The AdvisorShares DoubleLine Value Equity ETF (DBLV) returned -12.2% in the quarter, essentially matching its benchmark during this most challenging quarter.

The relative outperformance of value stocks—particularly the late-cycle names—versus growth stocks again in the second quarter aligns with our past PM commentaries, which noted that the higher growth prospects and lower valuation multiples of value names, as well as the key risks associated with higher multiple growth names in a rising rate environment, would prove relative safe havens.  While we continue to prefer late cycle value stocks over growth names, we increasingly prefer defensive stocks that can better weather the rising twin risks of protracted inflation and higher rates on the one hand, and the slowing growth or outright recession now emerging on the other hand.  Indeed, U.S. equities likely will continue to struggle on still-worsening inflationary pressures, protracted supply chain disruptions, sharply rising interest rates, hawkish central bankers, growing recessionary fears and continued geopolitical concerns around the war in Ukraine and continual COVID lockdown risks in China and elsewhere.  In such an environment, prudent investors should seek to lose less rather than gain more, and we certainly remain highly cautious presently, even as we search for beaten-down gems-in-the-rough that should outperform as the economy recovers from its current challenges sometime in the future.

Even though, historically speaking, stagflationary environments are rare, it seems as though the U.S. is currently struggling through one.  The real GDP number for the first quarter was -1.6% and GDPNow is forecasting -2.1% for the second quarter, as the inverted 2s10s continues to signal an imminent recession.  Meanwhile, the rate of increase in the consumer price index (CPI) is still rising even after posting 8.6% growth—the highest rate since 1981—in May, and expectations remain for a high-8% print for June.  Economists continue to debate whether second quarter real GDP print will be negative—technically, the definition of a recession—with blue-chip consensus forecasts still calling for a positive-but-lower rate of growth.  Ominously, the declining consumer sentiment indicators and downbeat commentary from leading retailers like Target and Walmart also suggest that growth has slowed dramatically, as sharply higher inflationary pressures outstrip wage increases and prompt consumers to hold back on all purchases beyond the basics.  Periods of protracted inflation and slow or negative growth have historically proven to be very difficult periods for investors, as both equities and fixed income products tend to struggle under the dual impact of diminished earnings growth (bad for stocks) and rising rates (bad for bonds).  As equity investors, we prefer companies with pricing power, more flexible cost structures, capex-light investment profiles and healthy balance sheets to weather through such periods.

The Federal Reserve and other central banks likely will continue to raise rates in the current environment until inflation is brought under control, or at least, that remains their stated intention.  Historically, the fed funds rate has had to rise much higher at the current levels of CPI growth in order to achieve price stability, so we believe we remain well below the neutral rate required.  However, history also suggests that the rate hikes often lead to recession and crisis for portions of the economy, as the accommodative liquidity conditions suddenly become highly restrictive.  Adding to the risks of a hard landing is the quantitative tightening that is planned alongside the rate hikes.  The sharp drop in equities seen in the second quarter suggest that investors are already likely pricing in a dramatic slowdown, with adverse impacts on weaker companies baked into these expectations.  The question is whether the equity market has fully discounted these risks yet, especially given how high valuation multiples were at the start of the current correction.

The upcoming second quarter earnings reports from public companies will help to illuminate the extent to which the market has properly discounted the ongoing slowdown and rising risks of a hard landing.  Of note, consensus earnings expectations for S&P 500 companies for the second quarter have come off only about one percent in the last few months, which is less than the normal historical pattern of a two percent decrease; and this implies that analysts have not reduced earnings forecasts very much despite the high inflationary pressures and the reduced growth resulting from that inflation.  To wit, second quarter earnings are expected by consensus to rise 5.3% over the prior year, versus the 11.5% year-over-year growth posted in the first quarter.  Meanwhile, forward 12-month earnings estimates have actually risen by 7.5% since the start of 2022.  It is important to note that these earnings growth forecasts are in nominal terms, so rising expectations over the first half of 2022 is eminently plausible.  However, these forecasts also implicitly suggest that the high inflation is not creating demand destruction, nor is it compressing margins.  We think those two implicit assumptions are difficult to make in the current environment.  First, given the declining consumer sentiment indicators and the negative commentary from leading consumer discretionary companies, we would expect that higher energy, food and rent costs will destroy demand for non-essential items for a broad subset of the US populations.  Second, we would highlight that producer price indicators like the PPI are actually running much hotter than the CPI, which would imply that input cost inflation is actually higher than selling prices for many companies—indicating margin compression.  To what extent the leading companies in the S&P 500 can better manage their margins than what the CPI-PPI differential rates would imply, thereby delivering better-than-expected results and forward guidance, remains an open question, and one that we will be focused on during the upcoming earnings season.  In any case, we believe that consensus earnings expectations for the second half are too optimistic and will need to come down, even recognizing that such they are in nominal terms and thus upwardly biased due to the ongoing inflation.

As we have previously noted, we believe that investment managers (and their clients) are best positioned to create lasting value by seizing upon opportunities created by the recent jump in short-term volatility, but this requires keeping one’s focus primarily on the long-term fundamentals of each investment.  As the market environment becomes choppier, active investment management grounded in such fundamentals should increasingly shine, particularly if the rising uncertainties lead to greater dispersion in the valuations and price performances of individual stocks within broader sectors, styles or factors.  We will certainly continue to follow our differentiated fundamental value investment strategy, seeking attractive long-term investment ideas and maintaining a prudently positioned portfolio, which strikes reasonable balances between those investment ideas offering safety in increasingly uncertainty times and those holdings representing compelling long-term value.


In terms of the current portfolio’s positioning by sector, relative to the Russell 1000 Value Index, DBLV is overweight health care, consumer staples, industrials, materials, communication services and energy.  It is underweight utilities, real estate and information technology.  It is broadly equal-weight consumer discretionary and financials. These portfolio exposures reflect a healthy exposure to defensive names that can continue to post earnings growth even in the event that economic activity slows materially on inflation-driven demand destruction in the months ahead, as well as continued exposure to late-cycle reflationary stocks that will also benefit from the still rising inflation.  We see such a balanced set of portfolio exposures as the most prudent positioning amidst the elevated set of market risks that we have identified.  The portfolio is also carrying an elevated level of cash in order to keep dry powder opportunistically as prices and valuation multiples decline, potentially creating new investment opportunities.

The portfolio’s sector weights, both in absolute terms and also relative to the benchmark, are found in the following charts:

As of 06.30.22.

In information technology, we remain underweight relative to the benchmark for the sector, as much of the sector continues to come under disproportionate pressure in the face of further interest rate increases.  Recall that we already have reduced portfolio exposures in those companies that are more cyclical in nature—and thus more likely to post negative returns during a growth scare or in a recessionary environment—such as semiconductor or semi-cap names.  We continue to maintain positions in those names that trade at reasonable valuation multiples, such that they are mainly shielded from downward multiple rerating, and that also have strong enough franchises to achieve growth targets even as overall economic growth moderates (e.g., Microsoft, Flex, KBR).

We are about equal-weight within the financials sector.  During the quarter, we reduced positions in Capital One and Citigroup due to rising concerns about a recession, since both companies have major credit card operations that typically experience greater credit losses than commercial loans in periods of economic weakness.   That said, we maintain a healthy exposure to asset sensitive financials primarily through our holdings in banks (e.g. Wells Fargo, Citizens Financial, Citigroup, and State Street), consumer finance (e.g. Capital One) and life insurance (e.g. Prudential Financial), as these companies should all benefit from higher interest rates.    Generally, the near term outlook for these companies is positive, with core lending operations for banks and consumer finance companies seeing improving fundamentals—solid loan growth, expanding interest margin and benign credit losses—which are all supportive of core earnings.  Despite this, the stocks of these companies pulled back during the quarter, largely due to multiple compression reflecting recessionary fears.  As a result, banks now trade, based on FY 2023 P/E, at greater than a 40% discount to the broader market, which is a significantly higher discount to the historical average, even though banks boast stronger balance sheets today, enabling them to better handle potential future credit losses.  Within our financials holdings, we also own quality commercial P&C insurers (e. g. Chubb and Markel) that continue to benefit from strong commercial insurance pricing tailwinds, as well as an exchange (e.g. Intercontinental Exchange) that has a high mix of stable, recurring revenues complementing key areas of secular growth.  Earnings for these latter types of companies tend to be relatively resilient in a weak economy.   In light of all of this, we believe our financials holdings remain attractively valued.

The portfolio benchmark’s exposure to health care was significantly reduced during the Russell 1000 Value Index rebalance at the end of the quarter.  Moreover, we reduced during the quarter our overweight exposure in services (e.g., Elevance and Cigna).  Despite this, the portfolio continued to carry a moderate overweight to the sector during the second quarter.  Our sub-sector preferences within health care are largely unchanged.  Given the valuation discounts to the sector and overall market, coupled with strong earnings momentum and visibility, we continue to maintain the overweight within the health care services sub-industry.  We also continue to maintain a slight overweight in medical device manufacturers (e.g., Medtronic and Alcon), which continue to benefit from the reversion of global procedure volumes to normal pre-pandemic levels.  Conversely, we continue to maintain an underweight exposure to the life science tools providers given the sub-sector’s still elevated valuations and more mixed near-term earnings growth outlook, which is clouded by macroeconomic uncertainties in addition to the headwinds from lower COVID-19 testing volumes and vaccine bio-processing revenue.  Lastly, we have a slight biopharma underweight given the near-term headwinds from rising interest rates and potential US regulatory pressures on drug pricing.  However, we do see attractive opportunities in our current holdings (e.g., AstraZeneca, Sanofi and Biomarin) that have stronger idiosyncratic growth prospects,  lower patent expiry exposure and attractive pipeline profiles.

As of quarter’s end, we remain broadly equal-weight the consumer discretionary sector, while our exposure to the consumer staples sector is higher than the benchmark. That said, we continue to maintain across the two consumer sectors a bias toward higher quality, defensive names, which has served us well to date, in light of the mounting macroeconomic pressures that have begun to wreak a noticeable impact on consumer sentiment and behavior. Our staples positioning over-indexes to brands with the pricing power needed to navigate the inflationary cost environment (e.g., Philip Morris, Mondelez, and PepsiCo) with as little margin contraction as possible. Our positions in US Foods, Advance Auto Parts, and TJX Companies provide us with cyclical and reopening exposure at attractive valuations, thereby balancing out the high quality, defensive bias of our overall consumer positioning. As ongoing cost inflation and slowing growth continue to impact near term results, we maintain our expectation for further margin contraction and downward EPS guidance revisions as the year progresses. Nonetheless, stock price declines in the consumer discretionary sector and relative outperformance from consumer staples thus far have diminished somewhat the benefit of adding further to these defensive exposures. Consequently, we are on alert for opportunities to exchange those stocks that have worked well so far this year for more beaten down, pro-cyclical names with strong prospects to rebound as the market bottoms and investors begin looking beyond the recessionary risks to the recovery to occur somewhere over the horizon.

We are overweight the industrials sector, where we are maintaining cyclical exposure within transportation (Norfolk Southern), as supply chain frictions have temporarily disrupted the recovery and thus created opportunity.  We have later cycle exposure in the electrical equipment sub-industry (nVent), where electrification and connectivity infrastructure investments are ongoing and should drive improving fundamentals.  We also have later cycle exposure within commercial aerospace (Raytheon Technologies and Boeing) and construction equipment with the addition of Herc Holdings, Inc (HRI), as we see such names thriving in an eventual recovery. 

In communication services, we are modestly overweight the sector, with a mix of defensive holdings that can generate cash flow through the cycle given their ability to obtain pricing fairly reliably because of relative competitive strengths and business model quality (Verizon, Comcast), of reasonably-priced growth plays that also can post superior earnings through a down-cycle (Alphabet, Facebook), and of more cyclical names that should benefit from continued improvement in the economy (Discovery Communication). 

We are modestly overweight the materials sector, with a balance of cyclically sensitive and more defensive names.  Our position in Dupont provides cyclical, auto, semi-conductor and electronics exposure.  Our International Flavors & Fragrances holding provides indirect exposure to the more defensive consumer staples industry, as well as modest reopening economic upside alongside a significant turnaround and cost cutting opportunity.  Our Arconic position can benefit from a recovery in automobile, aerospace and beverage can manufacturing, while also affording exposure to the twin green secular growth stories behind electric vehicles, given their need 20% higher need for aluminum than traditional vehicles, and the sustainability trend driving greater penetration of recyclable beverage packaging.

We are modestly overweight the energy sector, with balanced exposures to the integrated oil and gas segment (Chevron), as well as to the independent exploration and production group (EOG Resources), and the refining sub-industry (Valero Energy).  We expect many energy companies to hold up in value in a reflationary environment, but will monitor our positions carefully given the risks associated with recession for these names.   

We remain underweight real estate stocks, as these companies tend to operate with significant amounts of debt and thus are heavily reliant on debt refinancings to drive growth.  Higher interest rates are likely to put upward pressure on funding costs, which could be a headwind for valuation multiples, while a significant economic slowdown could hamper access to debt capital and thus create liquidity issues.    Currently, we are relatively balanced in this sector with a defensive secular growth position (American Tower) and a cyclically-sensitive position (BXP Properties), and with both of these names well positioned to weather any recessionary risks.

As always, the DBLV portfolio’s sector exposures primarily reflect the DoubleLine Equities Team’s bottom-up investment process, which places an emphasis on individual stock selection. However, the macroeconomic views of DoubleLine Capital LP do secondarily inform these sector weightings.


As noted, DBLV matched its benchmark, the Russell 1000 Value index, beating it by a scant 2 basis points in the most recently completed quarter.  In terms of the sectoral attribution for the portfolio’s relative Q2 outperformance, quarterly results were helped by consumer discretionary, consumer staples, energy, health care, information technology, and real estate, offset by adverse results within communication services, financials, industrials and utilities.  Cash holdings had a positive impact on relative performance given the fact that all sectors posted price declines in the second quarter.

 As of 06.30.2022. Portfolio = DBLV; Russell 1000V = Russell 1000 Value.

The continued rise in stagflationary fears led to relative outperformance of the resource-centric energy and materials sectors, as well as highly defensive sectors like consumer staples and health care.  Meanwhile, less defensive sectors with high valuation multiples, such as technology and consumer discretionary, again underperformed, as did cyclically sensitive value-priced names in areas like financials and industrials, also lagged the broader value benchmark.

That DBLV posted performance matching its benchmark was driven by defensive positioning within the consumer, healthcare and real estate sectors, as well as in late-cycle materials and energy names, offset by negative relative attribution within communication services, financials and industrials.  The underweight in information technology also benefited DBLV’s relative performance in the second quarter.

Digging a bit deeper into the attribution analysis, DBLV benefitted from the defensive positioning within consumer discretionary, with positions in dollar stores and off-price retailers, and within consumer staples from highly defensive holdings in high quality tobacco and beverage names.  Also contributing were managed care and pharmaceutical positions within the health care holdings, as well as the increase in the weighting of this sector.  The underweight and defensive positioning within the high-quality cellular sub-sector within real estate also made a positive impact.  The materials sector contributed to DBLV performance via exposure to late-cycle industrial metals and also to a holding uniquely and defensively exposed to consumer staples customers.  Modestly overweight exposure to a balanced set of energy names also led to positive contribution in the quarter.  Meanwhile, an underweight in information technology names, as well as a preference for more defensive holdings within the sector, yielded positive attribution.

Technology-oriented and cyclically-sensitive names within communications services generated negative contribution to DBLV, as rate hikes and growth fears further pressured these names.  Similarly, inflation and growth concerns adversely impacted the higher-multiple holdings within the financial sector.  Cyclically-sensitive industrials names, in areas such as aerospace or capital equipment rentals, were adversely impacted by the same.  Finally, the lack of utilities holdings, one of the defensive sectors that did relatively better in the second quarter, also adversely impacted returns, although we view our outsized cash holding as the ersatz for this omission in our sector positioning.

Top Holdings

Looking at attribution by individual stocks, the top five positive contributors to second quarter performance were Arconic (ARNC), Dollar General (DG), Cigna (CI), American Tower (AMT) and Chubb (CB).

  • ARNC (materials) is a leading manufacturer of aluminum sheet, plate and extrusions.  During the quarter, the company announced plans to divest its Russian assets which removed a negative overhang.  The price of aluminum alloy also dropped 45% during the quarter.  While aluminum is a pass-through cost, it does impact working capital inventory; thus, as the price declines, less cash is tied up in working capital.  Lastly, and most importantly, ARNC held an investor day where management noted that the company is targeting $1.2 billion of normalized EBITDA by 2025.  These positive developments helped the stock outperform during the quarter.   ARNC has material upside considering the new level of earnings power, as well as the fact that auto and aerospace production rates are currently at recessionary levels—having never recovered from the downturn—and thus present good upside.
  • DG (consumer discretionary) is the largest operator of small format, discount retail stores in the United States. In Q2, DG registered meaningful outperformance thanks to a combination of the deteriorating macroeconomic backdrop and a stronger-than-expected earnings report. Investors were very much on edge following disappointing earnings results from fellow general merchandise retailers Target and Walmart, but DG’s unique characteristics leave it better positioned for the current phase of the economic cycle than larger retailers such as Walmart, thereby allowing the dollar store to report a much better-than-feared earnings print. DG’s business model tends to target trade-down customers when the average consumer’s wallet is pinched, boasts a higher mix of staple-like grocery and household essentials than its big-box competitors, and saves fuel for consumers given store locations that are generally closer to customers’ homes. With these defensive characteristics, along with excellent execution from a talented management team and a stronger-than-average tailwind from store count growth, DG is a quality way to navigate the consumer stress impacting markets.
  • CI (healthcare) is an integrated managed care provider and pharmacy benefit manager (PBM) that outperformed the broader healthcare sector during the second quarter, having posted a better-than-expected earnings result that included a raise to full-year 2022 guidance.  The result was driven by a lower-than-forecast medical loss ratio (MLR) in the managed care business after COVID-19 treatment costs dramatically fell following the Omicron wave.  Separately, CI management also held an investor day during which it raised its long term growth targets for the Evernorth (primarily PBM) business, underpinned by an attractive biosimilars opportunity, thus adding additional earnings growth visibility (+10-13% annually) over the next several years.  We continue to expect CI to re-rate positively and significantly from its current 11x 2023 P/E valuation, as the company proves out its integrated model with leading assets in managed care, PBM, and site-of-care services.
  • AMT (real estate), one of the largest real estate investment trusts (REITs), is a leading independent owner, operator and developer of wireless-communications-related real estate with a global portfolio of more than 200,000 cell tower sites.  The company continues to benefit from widespread 5G deployments in developed markets and 4G densification initiatives in emerging market.   Organic tenant billings growth has recently accelerated in Europe following the Telxius acquisition, and results continue to show strength in Latin America and Africa.   Meanwhile, contractual rental rate increases provide some hedge to inflation, which is highly valued by investors currently.   AMT’s strong macro tower franchise continues to benefit from high recurring revenue, long term contracts, and high entry barriers.   And we would expect ever-increasing mobile data usage, along with the guaranteed demand for co-location space at its macro sites secured via comprehensive MLAs, should support steady, multi-year revenue growth for the company.
  • CB (financials) is one of best commercial P&C underwriter in the industry, consistently delivering profitable long-term growth.   It has a dominant global franchise with a broad product offering and an extensive distribution network globally.  During its most recent earnings report, CB continued to deliver strong underwriting profits driven by a favorable commercial P&C pricing environment and via highly disciplined cost management.   Although rate increases are moderating, the insurance rate environment is expected to remain favorable in 2022 given rising CPI and social inflation trends, and due to loss fatigue in cat-exposed lines of businesses.   CB’s earnings tend to be relatively resilient in a weak economy and should further benefit from the commercial insurance pricing tailwinds, thus making the name a solid investment during stagflationary times.

The top five detractors from quarterly performance for DBLV were Herc Holdings (HRI), Warner Brothers Discovery (WBD), ICE (ICE), Boeing (BA) and State Street (STT).

  • HRI (industrials) is a leading construction equipment rental supplier, as well as a key vendor of used equipment, contractor supplies, consumables, tools, repair, maintenance, management services, safety training, equipment transport, rental protection, cleaning, refueling and labor.  The construction end-market remains healthy with robust demand and less-than-optimal supply, which has created an advantageous pricing environment for the company: utilization is high and rental rates continue to accelerate.  While the business is healthy, investor fears over a potential recession have caused the stock to de-rate during the second quarter on concerns about margin decrements in a downturn. Now trading at a significant discount to its public competitors, HRI stock appears to be pricing in a significant recession.  Given this, we see far less downside than upside in an eventual economic recovery.
  • WBD (communications services) is a media company providing content across multiple international distribution platforms. The company produces, develops and distributes feature films, television, gaming and other content in both physical and digital format over broadcast and cable networks, direct-to-consumer (DTC) channels, theatrical releases and gaming licenses.  Its content is broad and ranges from natural history and exploration and travel to general entertainment, live sports and children’s programming.  The product of the recent merger of Discovery with Warner Brothers assets spun out of AT&T, WBD enjoys both revenue and cost synergies of size from the combination, and boasts a CEO with demonstrated ability to exact such synergies.  WBD stock underperformed the wider sector index on growing fears of diminishing ad revenue in a recessionary environment, as well as on rising investor concerns over the high level of competition within the DTC channel.  Trading at less than 7x next year’s EBITDA, WBD is cheaper than many media peers despite greater opportunities to grow earnings and cash flow due to synergies and international opportunities and, therefore, remains attractive at current levels.
  • ICE (financials) operates multiple financial exchanges and securities clearing houses, enjoying strong competitive advantages from network effects and scale economies.  It also has a solid fixed income and data subscription business, as well as a strong mortgage technology franchise.  Its stock pulled back on investor concerns that it is overpaying for the Black Knight acquisition, especially considering the current headwinds caused by higher interest rates prevailing in the mortgage market.    That said, the deal makes long-term strategic sense as the acquisition of BKI’s solutions will accelerate ICE’s strategy of developing a true end-to-end solution for the mortgage manufacturing and servicing ecosystem, as the BKI solution fills in gaps within the mortgage workflow of ICE’s current solution.  With its stock now trading 16.1x FY2023 P/E, which represents a meaningful discount to industry peers, any potential adverse asset value impacts from the deal would seem to be mostly reflected in the stock price already.  Meanwhile, ICE’s continued pivot towards subscription-based services only enhances its earnings visibility, while secular trends in mortgage workflow automation should provide a growth tailwind.
  • BA (industrials) is a leading manufacturer of commercial airplanes as well as military aircraft and defense intelligent systems.  Most of the earnings and cash flow are generated from the company’s commercial airplane franchise.  While the fundamentals of the commercial plane business have been severely impacted by the Covid-19 pandemic, the market has been waiting for China to recertify the 737 Max and for the FAA to recertify the 787, as both of these events would materially contribute the Boeing’s free cash flow prospects.  China has recertified the Max; however, Boeing’s primary Chinese customers have not yet cleared the Max for service. Also, the FAA has not yet recertified the 787, and the timeline for this recertification is now likely falling into the third quarter of 2022.  China’s zero-covid policy also has not helped matters, given that the government’s repeated lockdowns are raising uncertainties around the country’s market, which is a major source of growth for commercial aerospace.  While Boeing has been at the epicenter of the Covid-19 pandemic, we believe the worst has passed, and expect that the company’s stock can realize the substantial upside in a post-pandemic world of recovered air travel demand and more normalized company fundamentals.
  • STT (financials) is a leading global trust and custody services provider.   The company also operates a scalable investment servicing platform that generates durable recurring fee revenue.   STT’s stock price weakened during the quarter on a weaker-than-expected revenue outlook.   We think this drawdown was overdone: although STT’s fee revenues are sensitive to equity market movements, STT management estimates that a 10% decline in the stock market will impact servicing fee revenues by only about 3%.  Meanwhile, STT should benefit from higher interest rates.  Moreover, STT’s earnings have been much more resilient historically than other asset sensitive financials during economic downturns due to the company’s minimal credit exposure.   Finally, STT is expected to benefit from the Brown Brothers Harrison’s Investor Services acquisition.  In light of all of this, we believe STT remains an underappreciated asset at 6.9x FY2023 P/E.  Indeed, even if earnings declined 35% from the peak, as experienced during the Global Financial Crisis, STT would still be trading at only 13x P/E, so much bad news already appears baked into the name at current levels.

During the most recent quarter, we made net additions to our positions in Biomarin Pharmaceutical (BMRN), Boeing (BA), Herc Holdings (HRI), International Flavors & Fragrances (IFF), Roche Holding (RHHBY) and Warner Brothers Discovery (WBD).  We made net reductions to our positions in Capital One Financial (COF), Cigna (CI) and Citigroup (C). We eliminated our holding in KLA Corporation (KLAC).

The top 10 portfolio holdings, by weight and active weight, as of month’s end, can be seen in the following tables:

As of  06.30.2022.

Active weight refers to the difference in allocation of an individual security or portfolio segment between a portfolio and its benchmark. For example, if a portfolio allocates 15% within the energy sector, and the benchmark’s allocation in energy is 10%, then the active weight of the energy segment of the portfolio is +5%. Active weight can also be referred to as relative weight.


As we have repeatedly noted, the fundamental value strategy informing our management of DBLV is well suited to navigate through myriad risk-reward environments. Recall that our differentiated strategy facilitates the construction of a portfolio with potentially higher prospective risk-adjusted returns by allowing us to seek compelling investments not only among lower-multiple value names tied to cyclical upswing but also to high-quality, less economically sensitive stocks trading at higher but still reasonable prices.  Following this strategy, we endeavor to invest in the mix of names offering the best value on a risk-adjusted basis, and currently hold a portfolio of stocks more attractively priced than either our benchmark or the broader equity index.  To wit, at quarter’s end, this balanced exposure carried a price-to-earnings multiple on 2022 consensus estimates for DBLV of 14.8x, versus the RLV at 15.4x and the S&P 500 at 19.0x.

​We thank you for your continued interest in DBLV.


Emidio Checcone
DoubleLine Capital
AdvisorShares DoubleLine Value Equity ETF (DBLV) Co-Portfolio Manager

Brian Ear
DoubleLine Capital
AdvisorShares DoubleLine Value Equity ETF (DBLV) Co-Portfolio Manager

Past Manager Commentary


  • A basis point is one hundredth of a percentage point (0.01%).
  • The Russell 1000 Index is a market capitalization-weighted index that measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of  the Russell 3000 Index.
  • The Russell 1000 Growth Index is a market capitalization weighted index that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth rates.
  • The Russell 1000 Value Index is a market capitalization weighted index that measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth rates.
  • The S&P 500 Index is an unmanaged index of 500 common stocks primarily traded on the New York Stock Exchange, weighted by market capitalization. Index performance includes the reinvestment of dividends and capital gains.
  • SPAC (special purpose acquisition company) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering for the purpose of acquiring an existing company.

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. Investing in mid and small capitalization companies may be riskier and more volatile than large cap companies. Because it intends to invest in value stocks, the Fund could suffer losses or produce poor results relative to other funds, even in a rising market, if the Sub-Advisor’s assessment of a company’s value or prospects for exceeding earnings expectations or market conditions is incorrect. Other Fund risks include market risk, equity risk, large cap risk, liquidity risk and trading 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 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.