EATZ: 3rd Quarter 2024 Portfolio Review
Portfolio
Performance
EATZ closed the third quarter on a high, with its net asset value (NAV) increasing by 8.72%. The portfolio outperformed the S&P 500, which posted a 5.89% gain during the same period. As of September 30, 2024, the fund received a Four-Star Overall Morningstar Rating in the Consumer Cyclical category, placing it among the top performers based on risk-adjusted returns out of 49 funds in this category.
Winners and Losers
Top performers for the quarter included Sweetgreen Inc. (SG) surging 46.49%, Cava Group Inc. (CAVA) with a 33.53% increase, and El Pollo Loco Holdings Inc. (LOCO) up 21.13%. On the other hand, the portfolio’s major detractors were Dutch Bros Inc. (BROS) down 22.63%, Domino’s Pizza Inc. (DPZ) which fell 16.38%, and Chipotle Mexican Grill Inc. (CMG) declining 8.03% for the quarter.
Portfolio
The fast-casual segment continues to expand, offering a higher quality dining experience compared to fast food but at a more affordable price than traditional sit-down restaurants. This segment is projected to keep growing as consumers increasingly seek convenient, affordable, and high-quality dining options.
New Positions
New positions were initiated with the acquisition of 3,700 shares in YUM China Holdings Inc. (YUMC) and 4,220 shares in Sweetgreen Inc. (SG), while a position in Cheesecake Factory (CAKE) was reestablished with the addition of 4,058 shares. Conversely, positions in Chuy’s Holdings Inc. (CHUY), Dave & Buster’s Entertainment Inc. (PLAY), Jack in the Box Inc. (JACK), and Portillo’s Inc. (PTLO) were exited. Several other trades involved smaller tactical adjustments to the portfolio.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| TXRH | TEXAS ROADHOUSE INC | 6.26% |
| WING | WINGSTOP INC | 5.84% |
| YUMC | YUM CHINA HOLDINGS INC | 5.43% |
| LOCO | EL POLLO LOCO HOLDINGS INC | 5.38% |
| CAKE | CHEESECAKE FACTORY INC/THE | 5.36% |
| EAT | BRINKER INTERNATIONAL INC | 5.09% |
| ARMK | ARAMARK | 5.07% |
| SG | SWEETGREEN INC – CLASS A | 4.88% |
| USFD | US FOODS HOLDING CORP | 4.82% |
| DPZ | DOMINO’S PIZZA INC | 4.67% |
As of 9.302024. 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
In Q3, consumer visits to dining establishments declined, with fast casual restaurants seeing the smallest drop, likely due to their affordability and emphasis on discounts and value meals. While older generations have cut back on dining out, Gen Z has increased their spending on restaurants, and millennials continue to frequent fast casual restaurants. Drive-thru and take-out frequency remained steady throughout the quarter, though delivery services experienced a slowdown. In Q4 we expect to see restaurants rolling out seasonal specials, capitalizing on popular flavors like pumpkin spice, while also adopting more sophisticated customer engagement strategies with loyalty programs that offer personalized experiences and rewards.
Cheers,Past Commentary
The Morningstar Rating™ for funds, or “star rating,” is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Past performance is no guarantee of future results.
©2024 Morningstar, Inc. All Rights Reserved. Morningstar and/or its content providers are the proprietors of this information; do not permit its unauthorized copying or distribution; do not warrant it to be accurate, complete or timely; and are not responsible for damages or losses arising from its use. Past performance is no guarantee of future results.
EATZ received four stars for the overall rating among 49 funds, four stars for the 3-year rating among 49 funds in Morningstar’s Consumer Cyclical category as of September 30th, 2024.
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 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.
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.