EATZ: 3rd Quarter 2023 Portfolio Review
Performance
EATZ ended the 3rd quarter with the net asset value (NAV) down 12.45%. The portfolio had a difficult third quarter, as did the overall market, the S&P 500 was down 3.27% for the quarter.
Portfolio
Winners and Losers
The leaders for the quarter were Carrols Restaurant Group INC (TAST), up 34.63%, and Domino’s Pizza Inc. (DPZ) up 12.51%. The biggest drags on the portfolio were Jack In The Box Inc. (JACK), losing 29.05%, and Red Robin Gourmet Burgers (RBGB) losing 43.42% for the quarter.
Portfolio
During Q3, the restaurant sector exhibited signs of resilience and progress, yet it still grappled with persistent hurdles like labor shortages and escalating expenses. The ability to adjust to shifting consumer tastes, incorporate technology, and prioritize sustainability continues to be crucial for achieving success in this dynamic landscape.
Holdings Changes
A new position was added in El Pollo Loco Holdings Inc. (LOCO) with 13,900 shares and existing positions were increased in BJ’s Restaurant Inc. (BJRI) with 1,061 shares, Carroll’s Restaurant Group Inc. (TAST) with 2,892 shares, and Red Robin Gourmet Burgers (RRGB) with 2,680 shares. Papa John’s International Inc. (PZZA) was removed from the portfolio and positions were reduced in Bloomin’ Brands Inc. (BLMN) by 1,663 shares, Dave and Buster’s Entertainment (PLAY) by 2,360 shares and Dine Brands Global Inc. (DIN) by 2,303 shares. Other trades were smaller tactical adjustments to the portfolio.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| TAST | CARROLS RESTAURANT GROUP INC | 6.14% |
| MCD | MCDONALD’S CORP | 6.00% |
| ARCO | ARCOS DORADOS HOLDINGS INC-A | 5.99% |
| QSR | RESTAURANT BRANDS INTERN | 5.81% |
| DRI | DARDEN RESTAURANTS INC | 5.65% |
| CHUY | CHUY’S HOLDINGS INC | 5.28% |
| LOCO | EL POLLO LOCO HOLDINGS INC | 5.25% |
| DPZ | DOMINO’S PIZZA INC | 4.94% |
| CASY | CASEY’S GENERAL STORES INC | 4.91% |
| BJRI | BJ’S RESTAURANTS INC | 4.85% |
As of 09.30.2023. 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.
Market Update
Despite inflation, restaurant sales have managed to maintain their levels, as consumers continue to allocate their spending towards experiences and services. Many dining establishments have embraced technology-driven solutions to enhance their online ordering, contactless payment systems, and delivery logistics. This strategic adoption of technology has enabled them to better cater to evolving consumer preferences for convenience, even in the face of labor shortages during the third quarter.
Challenges in recruiting and retaining staff persist, resulting in reduced operating hours, streamlined menus, or an increased reliance on automation to bridge the labor gap. Restaurants are still grappling with the mounting costs associated with labor, food ingredients, and supplies. These cost pressures stem from various factors, including heightened demand for specific products, disruptions in the supply chain, and inflationary forces.
In response to these challenges, some establishments have adjusted their menu prices, explored alternative sourcing options, or sought out operational efficiencies to navigate this demanding landscape.
Cheers,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.