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
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. Investing involves risk including possible loss of principal.
The Sub-Advisor continuously evaluates the Fund’s holdings, purchases and sales with a goal of achieving its investment objective, which is not guaranteed, and judgments about the markets, the economy, or companies may not anticipate actual market movements, economic conditions or company performance. Security prices of small and mid-cap companies may be more volatile than those of larger companies and therefore the Fund’s share price may be more volatile than those of funds that invest a larger percentage of their assets in securities issued by larger-cap companies.
Options Risk. Selling (writing) and buying options are speculative activities and entail greater than ordinary investment risks. The Fund’s use of put options can lead to losses because of adverse movements in the price or value of the underlying asset, which may be magnified by certain features of the options. When selling a put option, the Fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the Fund if the price of the underlying asset is below the strike price by an amount equal to or greater than the premium. Purchasing of put options involves the payment of premiums, which may adversely affect the Fund’s performance. Purchasing a put option gives the purchaser of the option the right to sell a specified quantity of an underlying asset at a fixed exercise price over a defined period of time. Purchased put options may expire unexercised, resulting in the Fund’s loss of the premium it paid for the option.
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 to change. The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.