HDGE: 3rd Quarter 2022 Portfolio Review
Performance
Markets Review
Market participants are changing their exposures across stock characteristics. Rising interest rates and continuing Federal Reserve tightening are leading investors to shun highly indebted companies. Stocks of those companies are underperforming the broader market, as can be seen here.
Yet, money-losing companies whose stocks had fallen so much earlier in the year seem to be stabilizing now. Are investors taking a pause and cautiously rethinking risk appetites for young growth companies again? It seems to be the case.
Investors are once again embracing aggressive industry groups. These include Technology, Health Tech and Energy sector stocks.
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 2022. All Rights Reserved Two Rivers Analytics. Further distribution prohibited without prior permission.
* The Market Capitalization-to-GDP ratio (or the Buffet indicator) is a valuation multiple used to assess how expensive or cheap the aggregate stock market is at a given point in time. It was proposed as a metric by investor Warren Buffett in 2001, who called it “probably the best single measure of where valuations stand at any given moment”, and its modern form compares the capitalization of the US Wilshire 5000 index to U.S. GDP.
Top Holdings
The largest realized and unrealized losses for the second quarter were Cloudflare Inc Class A (NET), Bill.com Holdings, Inc. (BILL) and Autodesk, Inc. (ADSK). Cloudflare stock benefitted from the early August market rally and finished the quarter up 26.42%. The security software company continued to add large clients, which allowed it to beat estimates last quarter. The stock rallied as a result. Bill.com stock rallied during August, ending the quarter up 20.40%. The payment processing company announced results that exceeded expectations. They reduced their loss from last year’s quarter and topped forecast revenues. We exited the position. Autodesk stock had a strong July and early August. The design software company posted strong results. The stock rose in sympathy with other tech growth stocks in July and August. The stock closed 8.63% higher at the end of the quarter than on June 30th. We exited the position.
| Ticker | Security Description | Portfolio Weight % |
| OLED | UNIVERSAL DISPLAY CORP | -5.36% |
| HCP | HASHICORP INC-CL A | -2.24% |
| CACC | CREDIT ACCEPTANCE CORP | -2.21% |
| JAMF | JAMF HOLDING CORP | -2.17% |
| TPX | TEMPUR SEALY INTERNATIONAL I | -1.98% |
| TRUP | TRUPANION INC | -1.69% |
| BLD | TOPBUILD CORP | -1.56% |
| NCNO | NCINO INC | -1.56% |
| FFIV | F5 INC | -1.55% |
| ENR | ENERGIZER HOLDINGS INC | -1.51% |
As of 09.30.20202. Cash not included.
Brad Lamensdorf
Ranger Alternative Management
AdvisorShares Ranger Equity Bear ETF (HDGE) Portfolio Manager
Past 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.
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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.