HDGE: April 2020 Portfolio Manager Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/etfs/hdge.

Performance

For the month of April, the AdvisorShares Ranger Equity Bear ETF (NYSE Arca: HDGE) lost -15.63% on market price while the S&P 500 Index gained 12.82%.

Performance History (04.30.2020) HDGE NAV (%) HDGE Market (%)
1 Month -15.40 -15.63
3 Month 8.03 7.76
Year-to-Date 8.58 8.77
1 Year -9.02 -8.99
3 Years -12.51 -12.53
5 Years -11.80 -11.82

As stated in the Prospectus, the total annual operating expenses are 3.12% (includes 0.18% acquired fund fees). Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent month-end performance please visit  www.advisorshares.com/etfs/hdge.

Markets Review

Collapsing JP Morgan Stock is Signaling Wall Street’s Worst Fears for the Economy
 As the chart below shows, JP Morgan’s share price is about to break through March lows. That means expectations are that shares could go substantially lower amid analyst forecasts that earnings may fall 50% in 2020. In fact, many analysts are predicting earnings won’t recover to 2019 levels until 2022 as a result of falling interest rates and a collapsing economy. As the banking industry leader, trouble for JPM means trouble for the whole banking sector, with negative implications for credit creation and the broader economy, possibly into 2022.

The market bounce has turned investor sentiment from fear of loss to fear of missing out. In particular, companies that saw stocks hurt the most from the Covid-19 market impact, also saw stocks bounce back the hardest in April. The following chart shows the returns on stocks ranked by March momentum.

Shares of weak companies, companies with accounting flaws or simply overpriced stocks that short sellers tend to favor saw dramatic bounces as confidence returned to equity markets. Importantly, fundamentals in the economy continue to worsen, even as stock prices have mostly recovered.

Stocks were grouped and ranked by the relevant factor as of the end of the prior month and the returns computed for the month just ended.  Stocks chosen were based on Two Rivers Analytics’ universe of stocks.  © Copyright 2019.  All Rights Reserved Two Rivers Analytics.  Further Distribution Prohibited without prior permission.

 

Portfolio Review

For the month of April 2020, the largest realized and unrealized gains were Synchrony Financial (SYF), RealReal, Inc. (REAL), and Golar LNG Limited (GLNG). Synchrony Financial (SYF)  stock rose  23.00% despite missing expectations when they announced earnings. The company offers consumer credit including private label credit cards. We covered the position. Luxury consignment company, RealReal’s (REAL),  stock gained  67.48% after plummeting in March.  Investors  have warmed to retail stocks as the economy is slowly reopened. The company had laid off 25% of its staff on weak results, suspended guidance and moved to change their store policies to “by appointment only” in order to comply with social distancing requirements. We covered the position. Golar LNG (GLNG)  stock lost  -10.03% during April. The company received a force majeur notice from BP.  BP intends to postpone accepting delivery of a GLNG vessel as scheduled, depriving GLNG of those revenues. We covered the position.

The largest realized and unrealized losses for April were Wayfair, Inc. Class A (W), Ollie’s Bargain Outlet Holdings Inc (OLLI) and DuPont de Nemours, Inc. (DD).  Wayfair (W) stock spiked  132.11% during the month on renewed investor optimism for retail and better than expected results as consumers shifted purchases on line. We covered the position. Discount retailer Ollie’s Bargain Outlet’s (OLLI)  stock gained  46.55% for similar reasons to Wayfair.  Retail had a meaningful bounce in expectations. Ollie’s strategy of selling essential goods at discount prices overcame investors’ fears.  DuPont (DD)  stock rallied  37.89%. The company reaffirmed guidance before the corona virus impact began to be felt.  The company has new management and received a favorable ruling on a legacy environmental lawsuit from Chemours.

Top Holdings

Ticker Security Description Portfolio Weight %
PAGS PAGSEGURO DIGITAL LTD-CL A -2.38%
CRS CARPENTER TECHNOLOGY -2.20%
GPC GENUINE PARTS CO -2.10%
ELY CALLAWAY GOLF COMPANY -2.10%
CNI CANADIAN NATL RAILWAY CO -2.06%
WB WEIBO CORP-SPON ADR -2.05%
LYFT LYFT INC-A -2.05%
FANG DIAMONDBACK ENERGY INC -2.02%
ZG ZILLOW GROUP INC – A -2.02%
APPN APPIAN CORP -2.00%

As of 04.30.2020. Cash not included.

Respectfully,

Brad Lamensdorf
Ranger Alternative Management
AdvisorShares Ranger Equity Bear ETF (HDGE) Portfolio Manager

 

Past Manager Commentary

Definitions:

The S&P 500 Index is a free-float capitalization-weighted index based on the common stock prices of 500 American companies. It is one of the most commonly followed equity indices and many consider it the best representation of the market and a bellwether for the U.S. economy.

A Bear Market (Bearish) is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

A Bull Market (Bullish) is a financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

A short position is the sale of a borrowed investment with the expectation that it will decline in value.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

Implied Volatility is the estimated volatility of a security’s price. In general, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets.

The Volatility Index (VIX) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant
to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX is a contrarian sentiment indicator that helps to determine when there is too much optimism or fear in the market.


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.

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. The Fund may invest in (or short) ETFs, ETNs and ETPs. In addition to the risks associated with such vehicles, investments, or reference assets in the case of ETNs, lack of liquidity can result in its value being more volatile than the underlying portfolio investment. Other Fund risks include market risk, equity risk, short sales and leverage risk, large cap risk, early closing risk, liquidity risk and trading risk. Short sales involve leverage because the Fund borrows securities and then sells them, effectively leveraging its assets. The use of leverage may magnify gains or losses for the Fund. See prospectus for specific risks and details.

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 change.

The views in this commentary are those of the portfolio manager and many not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.