HDGE: 3rd Quarter 2023 Portfolio 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.
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.
|Ticker||Security Description||Portfolio Weight %|
|SHLS||SHOALS TECHNOLOGIES GROUP -A||-4.84%|
|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%|
|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