SENT: 2nd Quarter 2022 Portfolio Review
US Equity markets continued the downward trend for 2022 in the second quarter. At quarter end, the S&P 500 has had its worst six month start to a year since the early 1970s. The markets tended to continue the trend from Q1 as it punished growth stocks and high beta stocks. With the backdrop of rising interest rates, the multiple the market is willing to pay for future growth has come down. This trend affects the companies with the highest growth expectations the most. In addition, mid- and small-cap stocks sold off slightly worse than large cap in the quarter – again because of the perceived risk of smaller companies compared to larger companies.
The AdvisorShares Alpha DNA Equity Sentiment ETF (SENT) employs an all-cap investment strategy, however, it has been overweight in mid- and small-cap as those two categories make up nearly 60% of the portfolio. In addition, our portfolio is designed to find companies growing faster than Wall Street expectations so it has a bias towards companies capable of out-sized growth potential. This leads us to more growth and high beta stocks in our portfolio. As a result, the equity side of the portfolio lagged in the quarter. However, the months of April and June both provided downward market moves that benefitted our hedges in the SENT portfolio. We took profits in the hedges in both months and in the end, those hedges are what explain our out-performance for the quarter relative to the S&P 500 and the Russell 3000.
SENT was down -13.1% for the quarter while the S&P 500 was down -16.1% and the Russell 2000 was down -17.2% for the quarter. Our hedges are built on these two indices and they explain the out-performance. The Russell 3000 was down -16.7%.
Within the equity portfolio, our biggest contributors to the portfolio success were Photronics (PLAB), SM Energy (SM), ConocoPhillips (COP), Shockwave Med (SWAV), and Continental Resources (CLR). Each of these stocks delivered returns in excess of +20% for the quarter. The biggest detractors in terms of losses in the portfolio were AirBnB (ABNB), RingCentral (RNG), Revolve Group (RVLV), Eagle Bulk Shopping (EGLE), and MaxLinear (MXL). Each of these stocks lost between -40% and -46%.
|Ticker||Security Description||Portfolio Weight %|
|IWM US 10/21/22 P163||3.44%|
|ELF||ELF BEAUTY INC||1.03%|
|CCRN||CROSS COUNTRY HEALTHCARE INC||1.00%|
|MRC||MRC GLOBAL INC||0.98%|
|OCSL||OAKTREE SPECIALTY LENDING CO||0.98%|
|CNM||CORE & MAIN INC-CLASS A||0.97%|
|OXY||OCCIDENTAL PETROLEUM CORP||0.97%|
|IPAR||INTER PARFUMS INC||0.97%|
|NEX||NEXTIER OILFIELD SOLUTIONS I||0.97%|
As of 06.30.2022. Cash is not included.
AdvisorShares Alpha DNA Equity Sentiment ETF (SENT) Portfolio Manager