EATZ: 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/eatz.

Performance

After a weak 1st quarter in 2022, the restaurant industry has continued to struggle in the 2nd quarter with EATZ returning -27.83% (NAV) for Q2 2022. The S&P 500 was also negative.

Winners and Losers

The lone bright spot in the portfolio for Q2 was McDonald’s, but only by about 5 basis points (0.05%). Everything else was negative for the quarter. EATZ’ portfolio was most negatively impacted by a few names, including Dutch Bros., BBQ Holdings, Dave & Busters, and Sweetgreen, each one contributing just over -3% to the portfolio.

Portfolio

The restaurant industry is beginning to feel the impact of the Federal Reserve’s (Fed) aggressive approach to curbing inflation. We find ourselves in a fine balance between capturing the pent-up demand from people clearly ready to get out and socialize versus increased labor costs, a tight labor market, and a delayed rebound to pre-pandemic levels in business events.

New Positions

During the 2nd quarter, a few small tactical trades were made to try to take advantage of what we believed were short term over-bought or over-sold conditions. One notable position that we continued to add to was Dutch Bros. which, as noted above, was one of our most underperforming positions for the quarter. We believe that the market acted much too aggressively to knock the price down, so we took advantage of that decline to add to our position and lower our cost basis.

News/General Update

The markets are clearly volatile this year. We have what some would call an overheated economy driven by the unprecedented action of both the Fed during the pandemic and by federal legislators who were aggressively driving capital into tax-payer’s bank accounts in an attempt to offset economic losses during the lockdown. Now, with the Fed trying to tame inflation, it appears there is a price to be paid for so much financial stimulus. Additionally, there is war in Ukraine, and China is still struggling to contain their COVID related issues – both impacting global economies.

Top Holdings

Ticker Security Description Portfolio Weight %
BROS DUTCH BROS INC-CLASS A 10.93%
ARCO ARCOS DORADOS HOLDINGS INC-A 10.48%
BBQ BBQ HOLDINGS INC 7.84%
PLAY DAVE & BUSTER’S ENTERTAINMEN 4.59%
STKS ONE GROUP HOSPITALITY INC/TH 4.51%
BLMN BLOOMIN’ BRANDS INC 4.44%
CMG CHIPOTLE MEXICAN GRILL INC 3.69%
DENN DENNY’S CORP 3.06%
JACK JACK IN THE BOX INC 2.81%
WEN WENDY’S CO/THE 2.66%

As of 06.30.2022. Cash is not included. Subject to change.

Please see our complete Fund holdings at advisorshares.com/etfs/eatz. The holdings details are updated each market day.

 

Cheers,

Dan Ahrens
AdvisorShares
AdvisorShares Restaurant ETF (EATZ) Portfolio Manager

 

Past Manager 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.


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.

Investing involves risk including possible loss of principal. The hotels, restaurants & leisure industry is highly competitive and relies heavily on consumer spending for success. The prices of securities of companies in the industry may fluctuate widely due to general economic conditions, consumer spending and the availability of disposable income, changing consumer tastes and preferences and consumer demographics, in addition may be affected by the availability and expense of liability insurance. Legislative or regulatory changes and increased government supervision.

The success of companies owning and operating restaurants depends heavily on disposable household income and consumer spending, and changes in demographics and consumer preferences can affect the success of such companies. These companies may be subject to severe competition, which may have an adverse impact on their profitability. In addition, restaurants may be affected by nutritional and health concerns, and federal, state and local food inspection and processing controls. Changes in labor laws and other labor issues, such as increased labor costs, could adversely affect the financial performance of such companies.

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.