GK: 1st Quarter 2023 Portfolio Review
Commentary
I’m pleased to say that the AdvisorShares Gerber Kawasaki ETF (ticker: GK) had its best quarter in its history in Q1 2023. This was led through the outperformance of the main sectors that the GK invests in. The fund has been able to take advantage of this reversal in markets with the type of outperformance that I expect in a more bullish investment environment.
As the markets digest the slowdown in inflation and the interest rate hiking cycle comes to an end, growth stocks are back into the forefront of investors’ interest. GK’s position in technology benefited performance greatly in Q1, led by Microsoft, Nvidia, Apple and Tesla. GK also saw outperformance in the consumer discretionary sector of the fund, led by Nike and Topgolf/Callaway.
New positions have been added to the fund to take advantage of emerging opportunities. We believe we will see much higher consumer spending and travel from consumers in China in the post COVID era. To take advantage of this, Las Vegas Sands was added to the portfolio for exposure to the gaming and leisure sectors in Asia. During Q1, the market saw a decline in banking stocks – to which GK had no exposure. However, the banking crisis caused an overall decline in the financial sector and GK’s position in LPL Financial was affected. Because we believe LPL’s sell-off was unfounded, we used the lower prices during Q1 as an opportunity to aggressively add to the fund’s position in LPL. Some of GK’s Tesla position was trimmed in Q1 as it became too overweight in the portfolio relative to overall expectations for performance. Tesla has continued to cut prices of their vehicles, eating into profits for shareholders. Earnings expectations for Tesla have declined from $6 six months ago to $4 today which led us to lower our price target for Tesla as well as our allocation. While we believe many of the actions taken by Tesla’s CEO, Elon Musk, have been detrimental to Tesla’s sales and profit, we feel its long term story remains intact and Tesla continues to be in a top position in GK. Because we believe the return of consumers to the movie theaters as well as travelers from China will supply a big boost to physical entertainment business, we added to our position in Disney throughout the quarter. We also feel streaming entertainment led by companies like Netflix will continue to profit with new austerity. And a renewed focus on quality over quantity. Over the last quarter, we’ve witnessed tremendous cost discipline come into corporate America which we expect to lead to higher than expected profits in 2023 for the companies owned by GK.
Currently, market expectations for 2023 are quite low, but we believe there is a substantial chance of outperformance beyond this outlook. We have not moved into the bull camp yet because we feel that until the Federal Reserve has stopped its interest rate hike program, we are at risk of a recession. Although we expect the Fed to discontinue hikes after its next meeting in May. Once we are able to assess the Fed’s damage to the economy, we will be in a better position to make aggressive investment decisions.
We are pleased with the performance of the fund in Q1 with an overall return of 14.1% versus the S&P 500 benchmark of 7.5%. This type of performance is in line with what we expect. We appreciate your support through a very difficult period of time and hope to be able to continue our outperformance for many years to come in the new bull market. As we enter Q2, we will begin to see how the changes in interest rates will affect earnings, as well as the economy. Time is the only solution in discovering where the next move in markets will be.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| TSLA | TESLA INC | 8.97% |
| MGM | MGM RESORTS INTERNATIONAL | 7.34% |
| MSFT | MICROSOFT CORP | 5.91% |
| NVDA | NVIDIA CORP | 5.18% |
| AAPL | APPLE INC | 4.96% |
| NFLX | NETFLIX INC | 4.60% |
| DIS | WALT DISNEY CO/THE | 4.41% |
| LPLA | LPL FINANCIAL HOLDINGS INC | 4.33% |
| DE | DEERE & CO | 3.90% |
| VICI | VICI PROPERTIES INC | 3.09% |
As of 03.31.2023. 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
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