HDGE: March 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.


For the month of March, the AdvisorShares Ranger Equity Bear ETF (NYSE Arca: HDGE) gained 21.65% on market price while the S&P 500 Index lost 12.35%.

Performance History (03.31.2020) HDGE NAV (%) HDGE Market (%)
1 Month 21.42 21.65
3 Month 28.35 28.92
Year-to-Date 21.42 21.65
1 Year 0.94 1.24
3 Years -7.73 -7.68
5 Years -9.01 -8.99

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

The escalating high yield CDX index spread shows markets are bracing for an ugly period. The CDX index measures returns that high yield investors require to assume elevated default risk of high yield bonds. In good times the spread between the High Yield CDX Index and Treasuries narrows.  This happens because investors feel confident enough in the state of the economy to take on the higher default risk that high yield bonds carry. 

However, as the chart below shows, in times of financial crisis the spread spikes sharply as investors sell down risky assets, fearing the worst. The fact that the spread is a now a lofty 593 is an indication of how frightened investors are becoming. The current spread is even higher than it was during the periods around the financial crisis in 2012- 2013 and 2015-2016.

Short investors performed well in March, with the most heavily shorted stocks losing 30%.  We have several names that have lost that much in our portfolio.

One of the factors most associated with stock price declines is financial leverage.  Stocks of companies with high net debt to EBITDA ratios fell hard as compared to their less-levered brethren.

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

The fund continues to focus on cash-burning companies that need periodic funding in order to survive. In this environment, these types of shorts provide the best opportunities.

For the month of March 2020, the largest realized and unrealized gains were Credit Acceptance Corporation (CACC), Harley-Davidson, Inc. (HOG), Lyft Inc Class A (LYFT) and TechnipFMC Plc (FTI).

Credit Acceptance stock plunged  -36.58% in March. The business lends money to subprime auto buyers, then repackages the loans into asset backed securities. We are witnessing a deterioration in credit quality, with defaults primed to rise. Lending terms are being stretched beyond what is prudent. Harley-Davidson stock dropped  -37.87%. The troubled motorcycle manufacturer has been losing share to overseas competitors.  We covered the short as our thesis has played out. Lyft Inc stock plummeted  -29.56%. Lyft, like larger Uber, is a consistent cash burner that is dependent on the capital markets. The stock is expensive, and it is unclear if they will ever make a profit.  Corona virus fears are dampening demand severely. TechnipFMC lost  -54.58% in March. Technip services the oil industry. The decline in oil prices and the Corona virus woes forced the company to delay a much-anticipated transaction that would split the company into two parts.  We covered the short.

The largest realized and unrealized losses for March were Chewy, Inc. Class A (CHWY), Wayfair, Inc. Class A (W) and Grubhub, Inc. (GRUB).

Chewy stock gained  26.66% due to Corona-virus induced “nesting”. The company burns cash and the stock is very expensive. Wayfair stock fell  -15.46% in March. The company is a cash burner as well and is dependent on capital raising to stay afloat. Their business model does not allow for visibility into how the company can ever turn a profit. Grubhub stock fell -15.34%. The company’s fundamental metrics are weak and growth is slowing. New competitors are rushing into the space, including Google, DoorDash, UberEats and others. The company also burns cash. We covered the short in April. 

Top Holdings

Ticker Security Description Portfolio Weight %

As of 03.31.2020. Cash not included.


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


Past Manager Commentary


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.