GK: 2nd Quarter 2024 Portfolio Review
Commentary
The quarter began with markets moving lower after a robust first quarter but then reversed course in the last two months, moving higher. The fund’s total return for the first six months of the year is 18.78% (NAV), compared to the S&P 500’s 15.29%. This outperformance is attributed to our investments in AI-related positions and strong performances
in several other sectors.
In my opinion, the AI theme is one of the most significant investment opportunities I’ve encountered in my 30 years of investment experience. When I started my career, I witnessed great innovations with the advancement of the Internet and the personal computer. Many of the same companies involved in the ’90s boom are now leading the AI boom. We’ve added positions in Microsoft, Dell, Broadcom, and Amazon to increase our exposure to AI. These companies, which have outperformed since the dot-com boom, continue to prove their innovation and dedication, making them stellar long-term performers.
I made several changes to our consumer discretionary section by divesting from Lululemon and Las Vegas Sands and adding On Running Shoes and Crocs. We also exited positions in ON Semiconductor and Steel Dynamics, perceiving limited opportunities compared to the rest of the portfolio. Las Vegas Sands’ exposure in Asia, particularly China, was duplicated in our exposure through MGM Resorts, which we prefer due to MGM’s premium position in the Las Vegas gaming market and online gambling. I am particularly positive about MGM Resorts as they expand into new markets in New York and Japan.
I continued to take profits from positions like NVIDIA, which had become outsized. I aim to limit our top positions to no more than 10% of the overall fund. Profits from high PE (price-to-earnings) stocks are being reinvested into lower PE stocks, and I am seeing real estate-related positions perform well as the perception of lower interest rates over the next year becomes more of a reality. I am bullish on positions like Lennar, which is experiencing enormous demand for new housing, and I expect lower interest rates to significantly boost home sales.
I am actively looking for new opportunities in healthcare, financial services, technology, and other areas. With the election on the horizon, I anticipate elevated volatility for the rest of the year. Regardless of the politics, I believe both candidates present a good opportunity for the US economy to continue growing post-election, as neither’s policies are regressive. We expect more positive economic policies from both parties.
It is crucial for the Federal Reserve to start lowering interest rates to protect the economy from further weakness and relieve small businesses and individuals from high credit costs. We see lower rates creating numerous opportunities for sectors that have underperformed and are looking to increase exposure in interest rate-sensitive areas like small and mid-caps and real estate-related investments. I believe small and mid-caps present an outsized opportunity compared to the high-valued large caps that have outperformed in recent years.
Thank you for your continued support of the fund. As we celebrate our three-year anniversary, despite a difficult first year, our performance has improved significantly in the subsequent years. We remain committed to outperforming over the next several years to make up for our weak first year. We look forward to moving forward positively and are bullish about the investment environment with much lower rates on the horizon.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| NVDA | NVIDIA CORP | 9.33% |
| MSFT | MICROSOFT CORP | 7.99% |
| MGM | MGM RESORTS INTERNATIONAL | 7.48% |
| GOOG | ALPHABET INC-CL C | 6.82% |
| AAPL | APPLE INC | 6.75% |
| NVO | NOVO-NORDISK A/S-SPONS ADR | 6.71% |
| LEN | LENNAR CORP-A | 4.92% |
| NFLX | NETFLIX INC | 4.83% |
| TT | TRANE TECHNOLOGIES PLC | 4.34% |
| LPLA | LPL FINANCIAL HOLDINGS INC | 4.31% |
As of 6.30.2024. Cash is not included. Subject to change.
Regards,
Ross Gerber | Gerber Kawasaki | President and CEO
AdvisorShares Gerber Kawasaki ETF (GK) Portfolio Manager
Past Manager Commentary
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.
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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.
Investing involves risk including possible loss of principal. The Sub-Advisor’s judgment about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance, and these factors may affect the return on your investment. When models and data prove to be incorrect or incomplete, any decisions made in reliance thereon expose the Fund to potential risks. In addition, the use of predictive models has inherent risk. Because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically.
Companies involved in the cannabis industry face competition, may have limited access to banks, limited resources due to litigation and are dependent on receiving necessary permits and authorizations to engage in medical cannabis research or to cultivate, possess or distribute cannabis. The possession and use of cannabis, even for medical purposes, is illegal under federal and certain states’ laws, which may negatively impact the value of the Fund’s investments.
The value of stocks of technology companies tend to be more volatile than the overall market and are vulnerable to rapid changes in technology, rapid product obsolescence, the loss of patent, copyright and trademark protections and government regulation and competition. The expansion of online gambling (both regulated and unregulated), including the award of additional licenses or expansion or relocation of existing gambling companies, and competition from other leisure and entertainment activities, could impact these companies’ finances. Companies within the biotech industry invest heavily in research and development, which may not lead to commercially successful products.
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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.