SENT: 1st Quarter 2023 Portfolio Review
Portfolio Review
Broad market indices continued to climb in Q1 2023 building on their success in Q4 2022. But the gains have not been without some volatility as a banking crisis and Federal Reserve policy have stunted the small cap indices move upwards. Meanwhile, those same issues have caused a flight to quality that has benefited the mega-caps and propelled the large cap indices higher.
You can see the mega-caps leading the way in the performance of the S&P 500 Index vs the S&P 500 Equal Weight Index in Q1 2023: +7.50% vs +2.93%.
The Russell 2000 Index has experienced more of the volatility in the quarter thanks to the banking issues as most regional banks fall into this index and most small cap companies rely on credit from these regional banks. Both of those issues have put pressure on the index. The Russell 2000 finished the quarter at +2.74% return but recall that it delivered +9.75% in January alone so February and March have put pressure on the small cap index.
Our AdvisorShares Alpha DNA Equity Sentiment ETF (ticker: SENT) finished the quarter at +2.59% which we are content with given our material exposure to the mid/small cap space and our over-weight exposure to financials and regional banks. Recall that our portfolio of stocks is targeted to be roughly 40/60 ratio of large caps to mid-small caps. The increased exposure to mid-small cap hurt our overall returns but we out-performed in each of these equity categories compared to the indices.
Our large cap equity portfolio delivered +9.9% returns for the quarter which compares very favorably to the S&P 500. Our mid-small cap equity portfolio delivered +3.2% returns which compares closely to the Russell 2000 returns. Our hedges then produced a modest drag on returns as the indices were positive so the hedges were negative.
We are encouraged by the fact that our overall portfolio performed well despite our increased exposure to financials and material exposure to regional banks. The KBW Nasdaq Bank Index* lost nearly -25% for the month of March when the bank issues crept up on the markets. In that same month, our average regional bank stock return was just -15% which is materially better than the bank index.
In other words, we out-performed in the banks we owned which we would expect because these banks have strong digital signals which is a sign of strength in their underlying consumer business. Banks that are experiencing good customer growth are not typically the banks that will suffer a bank run.
For the quarter, the ten biggest contributors in the equity portfolio to returns were: Zscaler Inc (ZS), Lantheus Holdings Inc (LNTH), Lattice Semiconductor Corp (LSCC), Samsara Inc (IOT), Scorpio Tankers Inc (STNG), United Airlines Holdings Inc (UAL), Arista Networks Inc (ANET), Super Micro Computer Inc (SMCI), Qualtrics International Inc (XM), and NerdWallet (NRDS)
In the same quarter, the ten largest negative contributors in the equity portfolio to returns were mostly financials (6 out of 10): Fate Therapeutics Inc (FATE), 2Seventy Bio Inc (TSVT), Enphase Energy Inc (ENPH), Heartland Finl Usa Inc (HTLF), First Commonwealth Financial Corp (FCF), Associated Banc Corp (ASB), Calix Inc (CALX), FNB Corporation (FNB), Ladder Capital Corp (LADR), and Hercules Capital Inc (HTGC).
* KBW Nasdaq Bank Index is a modified-market capitalization-weighted index composed of large national US money centers, regional banks and thrift institutions primarily engaged in US banking activities and publicly traded in the US.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| PCTY | PAYLOCITY HOLDING CORP | 1.13% |
| SNCY | SUN COUNTRY AIRLINES HOLDING | 1.12% |
| ANF | ABERCROMBIE & FITCH CO-CL A | 1.12% |
| ZBRA | ZEBRA TECHNOLOGIES CORP-CL A | 1.11% |
| CDAY | CERIDIAN HCM HOLDING INC | 1.11% |
| PYCR | PAYCOR HCM INC | 1.10% |
| ALGT | ALLEGIANT TRAVEL CO | 1.10% |
| CIEN | CIENA CORP | 1.09% |
| MGNX | MACROGENICS INC | 1.09% |
| HUBS | HUBSPOT INC | 1.09% |
As of 03.31.2023. Cash is not included.
Respectfully,
Wayne Ferbert
Alpha DNA
AdvisorShares Alpha DNA Equity Sentiment ETF (SENT) Portfolio Manager
Past Commentary
Alpha, one of the most commonly quoted indicators of investment performance, is defined as the excess return on an investment relative to the return on a benchmark index.
Delta is a risk metric that estimates the change in price of a derivative, such as an options contract, given a $1 change in its underlying security.
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