HDGE: 1st Quarter 2024 Portfolio Review
Performance
For the first quarter of 2024, the AdvisorShares Ranger Equity Bear ETF (HDGE) returned 2.71% (market) while the S&P 500 returned 10.56%.
Markets Review
After an impressive rally in the fourth quarter of 2023, the momentum carried into 2024. However, a layer of weakness among many equities has started to develop despite indexes reaching new highs. Market participants continued to front-run the expectation that interest rates would fall sharply in the coming months. However, expectations of as much as 75 basis points of cuts in 2024 have started to recede. While lower rates would benefit stocks, we remain skeptical of the overall fundamentals.
As a result, we remain aggressively positioned to benefit from a sharp pullback in stocks. In the first quarter, we remained closer to fully invested on the short side and allocated to higher beta positions in mid-cap growth stocks. We expect that positioning to continue. First, the spread between the forward earnings on the S&P 500 and the 10-year Treasury Yield is just 34 basis points. The spread is hitting generational lows, raising our concern about stretched equity valuations.
As of 3.19.2024.
As valuations have become increasingly stretched, the bullishness among advisors is a concern. Historically, a level of bullishness that exceeds bearishness by 40% is a cause for concern.
As of 4.9.2024.
While these technical indicators have hit “sell” signals, the market sentiment is highly bullish. The spread between bulls and bears has now hit 40. Meanwhile, advisors are not the only segment of the investing population with solidly bullish views. Households have hit the peak of equity allocations since 1960 at 48%.
All of these are contrary indicators, suggesting plenty of optimism at a time when valuations are stretched. As expectations for interest rate cuts have been recalibrated recently, investors may adjust their equity allocations lower. As a result, the fund expects to remain aggressively positioned.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| SNV | SYNOVUS FINANCIAL CORP | -2.03% |
| SHLS | SHOALS TECHNOLOGIES GROUP -A | -2.03% |
| SNA | SNAP-ON INC | -2.07% |
| JACK | JACK IN THE BOX INC | -2.11% |
| SPT | SPROUT SOCIAL INC – CLASS A | -2.17% |
| VSAT | VIASAT INC | -2.28% |
| KMX | CARMAX INC | -2.44% |
| ATGE | ADTALEM GLOBAL EDUCATION INC | -2.88% |
| O | REALTY INCOME CORP | -3.03% |
| WK | WORKIVA INC | -3.09% |
As of 3.31.2024. Cash not included. Subject to change.
Top 3 Contributors for the Quarter:
| VSAT | VIASAT INC | +81.23% |
| SHLS | SHOALS TECHNOLOGIES GROUP -A | +65.81% |
| MRCY | MERCURY SYSTEMS INC | +55.48% |
Bottom 3 Contributors for the Quarter:
| PI | IMPINJ INC | -47.21% |
| KMX | CAR MAX INC | -31.83% |
| NXST | NEXTSTAR MEDIA GROUP INC | -26.07% |
As of 3.31.2024.
Brad Lamensdorf Jon DelVecchio
Ranger Alternative Management
AdvisorShares Ranger Equity Bear ETF (HDGE) Co-Portfolio Managers
Past 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.
The CNN Business Fear & Greed Index is a compilation of seven different indicators that measure some aspect of stock market behavior. They are market momentum, stock price strength, stock price breadth, put and call options, junk bond demand, market volatility, and safe haven demand. The index tracks how much these individual indicators deviate from their averages compared to how much they normally diverge. The index gives each indicator equal weighting in calculating a score from 0 to 100, with 100 representing maximum greediness and 0 signaling maximum fear.
The Dow Jones Industrial Average (DJIA) is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes.
The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges, excluding companies in the financial sector.
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.