HDGE: 3rd Quarter 2023 Portfolio Review
Performance
Markets Review
Source: The Daily Shot. As of 10/18/23.The above chart shows the difference between the S&P 500 forward earning yield and the 10-year US treasury yield.
Higher interest rates cause us other concerns with respect to equities. Debt levels have exploded coupled with interest costs. Our concerns are that private investment may be crowded out by increased government debt and interest payment levels.
Source: CFRB.org
Next, investors are on margin amid higher borrowing costs. As the chart shows, major market bottoms occur near levels where investors have a positive credit balance. Higher negative balances poses risks as investors come off of margin, which may negatively impact market liquidity and exacerbate the downside.
Source: AdvisorsPerspectives.com. As of 9/30/23.
Lastly, cap rates have now converged with the 10-year treasury which has dis-incentivized real estate investors from buying. Given that the return on an investment property is now below the 10-year treasury rate, why would an investor buy?
They’re not. Investor purchases have fallen 45% this year. Given the scale of real estate markets as well as the trillions of commercial real estate debt that needs to be rolled over in the coming years, we are concerned about a spillover effect to equities. As a result, we remain aggressively short in the portfolio.
Source: Reventure Consulting. As of 10/13/23.
Cap Rate or the Capitalization Rate is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| SHLS | SHOALS TECHNOLOGIES GROUP -A | -4.84% |
| BC | BRUNSWICK CORP | -2.79% |
| SLG | SL GREEN REALTY CORP | -2.62% |
| CACC | CREDIT ACCEPTANCE CORP | -2.44% |
| SPT | SPROUT SOCIAL INC – CLASS A | -2.35% |
| BFH | BREAD FINANCIAL HOLDINGS INC | -1.96% |
| SLGN | SILGAN HOLDINGS INC | -1.91% |
| C | CITIGROUP INC | -1.82% |
| SPG | SIMON PROPERTY GROUP INC | -1.81% |
| HGV | HILTON GRAND VACATIONS INC | -1.80% |
As of 09.30.2023. Cash not included. Subject to change.
Brad Lamensdorf Jon DelVecchio
Ranger Alternative Management
AdvisorShares Ranger Equity Bear ETF (HDGE) Co-Portfolio Managers
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.
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