GK: 3rd Quarter 2024 Portfolio Review
Commentary
After a strong start in 2024, the AdvisorShares Gerber Kawasaki Fund (GK) experienced a period of consolidation in the third quarter. With market reversals in both August and September, our fund encountered a slight pullback, particularly in our technology and consumer discretionary positions. However, thanks to strategic positioning, we managed to close the quarter relatively flat, a less than the S&P 500 Index’s quarterly return of 5.89%. GK is up 18.62% (market) year to date and 31.33% (market) over the last 12 months ending 9/30/24.
GK Performance Context and Market Comparison
In evaluating our performance against the S&P 500, it’s essential to consider the index’s heavy weighting toward just a few large-cap tech companies, often called the “Magnificent Seven.” These top seven companies dominate the S&P 500, making up a disproportionately large share of its returns. Consequently, the index may not fully reflect broader market trends, as the remaining 493 companies contribute far less overall.
While comparing GK to the S&P 500 offers insights, it’s more meaningful for investors to consider indices that capture a wider spectrum of the market. The Russell 2000 Index, the Dow Jones Industrial Average, and the NASDAQ Composite Index are all valuable benchmarks, reflecting a diverse range of sectors and company sizes beyond the ultra-large caps. Keep in mind the GK holds 30 stocks and is meant to compliment a position in the S&P 500 by adding a growth component that doesn’t just mirror the Magnificent Seven stocks.
Diversified Approach and International Exposure
GK takes a diversified approach by including about 15% of its assets in international investments, which aren’t represented in the S&P 500. This global exposure allows us to capitalize on growth and innovation outside the U.S., adding resilience and potential in international markets. Our investment strategy prioritizes growth sectors and groundbreaking innovations, including companies with high potential that may experience rapid growth phases followed by longer consolidation periods.
Portfolio Changes
We made some changes in the 3rd quarter, selling Crocs and Super Micro Computer Inc. and adding new positions in General Dynamics, Stryker and Ferrari. This moved some weightings out of tech and consumer discretionary and into defense, health care and luxury vehicles. We are excited about the new line of electric and hybrid Ferraris and believe the brand value is massive. The defense industry is in high demand along with a new line of Gulfstream jets and that looks quite promising for General Dynamics, in our opinion. With ongoing demand for hip and shoulder replacements from an active senior community and with the growth of pickleball, the need for medical procedures continues. We believe Stryker has great medical technology and robotics products that may help address the unending demand for health care.
AI and Innovation: Long-Term Strategic Focus
In 2024, the first half of the year saw significant gains in AI-related stocks, which have been a central focus for our ETF. As anticipated, the second half of the year saw a more tempered performance as these stocks consolidated their gains. Nevertheless, we maintain a strong conviction in the transformative potential of AI over the next 5 to 10 years. In our opinion, AI is poised to be among the most significant technological advancements, and our fund is well-positioned to benefit from the innovations it drives.
Looking Ahead: Election Year and Economic Outlook
As we enter the fourth quarter and move toward an the election, short-term market uncertainties are likely to arise. We anticipate these concerns will subside as the election results bring clarity to potential policy directions. Regardless of the election outcome, we foresee a stable economic environment with positive growth potential.
Even with the substantial policy differences between the candidates, a mixed Congress and Senate are likely to result in limited changes to policy. Additionally, current economic indicators point to an environment of strong earnings and gradually declining interest rates, positioning the U.S. favorably for growth. In response, we’re actively aligning the GK to capitalize on these conditions over the coming year.
Thank you for your continued support and trust. We look forward to a promising 2025, with opportunities to deliver strong returns in an ever-evolving market landscape.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| MSFT | MICROSOFT CORP | 7.71% |
| NVDA | NVIDIA CORP | 7.58% |
| AAPL | APPLE INC | 6.75% |
| LEN | LENNAR CORP-A | 6.42% |
| MGM | MGM RESORTS INTERNATIONAL | 6.10% |
| NVO | NOVO-NORDISK A/S-SPONS ADR | 5.61% |
| TT | TRANE TECHNOLOGIES PLC | 5.49% |
| NFLX | NETFLIX INC | 4.80% |
| GOOG | ALPHABET INC-CL C | 4.55% |
| DIS | WALT DISNEY CO/THE | 4.32% |
As of 9.30.2024. 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
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.
Russell 2000 Index is a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index.
Dow Jones Industrial Average is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq stock exchange.
NASDAQ Composite Index is a market capitalization-weighted index of more than 2,500 stocks listed on the Nasdaq stock exchange.
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.
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.
Diversification does not guarantee favorable returns. While the fund invests across multiple thematic trends it is considered a “non-diversified fund” under federal law, the Fund may invest a greater percentage of its assets in a particular issuer and hold a smaller number of portfolios securities.
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.