SENT: 3rd Quarter 2022 Portfolio Review
Overall U.S. equity market volatility persisted in third quarter as all broad U.S. market indices posted negative returns including the S&P 500 Index, Russell 2000 Index, S&P 400 Index, S&P 600 Index, and the Russell 3000 Index. Growth stocks within these indices were the relative out-performers but were still negative for the quarter – with the exception of the Russell 2000 Growth Index which eeked out a modest profit at +0.24% for the quarter.
The Alpha DNA Equity Sentiment ETF (SENT) managed to deliver +3.83% for Q3. These returns compare favorably to the major market indices above that delivered returns between -2% and -5% for the quarter.
SENT is a hedged equity strategy. As a hedged equity strategy, the name perfectly describes the two portfolio components that provide contribution to the overall portfolio returns – the long equity holdings and the hedge overlay. Most quarters, these two components are inversely correlated. However, we managed to deliver a positive contribution to profits in BOTH components in Q3. The hedges contributed around +0.5% of the positive +3.8% overall returns. The other +3.3% was contributed by the equal weight individual equity portfolio.
The portfolio was overweight energy, financials, and transports compared to the broader indices we build our hedges in (i.e., the S&P 500 and the Russell 2000). While we were slightly overweight technology, we were underweight the sector compared to our historical averages – by a margin of 0.5x. Within technology, our portfolio was comprised mostly of semi-conductors.
The three industries delivering the most contribution in the quarter to, in order of magnitude were Energy, Technology, and Consumer Discretionary. Each of these sectors delivered a positive overall contribution and an average return per stock that was positive. The three sectors that detracted the most from the portfolio returns were, in order of worst listed first, Financial services, Industrials, and Real Estate. Technology was a laggard in the broad markets as a sector in the quarter. However, our portfolio’s ability to produce strong positive returns in the face of those market winds was a very strong positive for the portfolio given that we are overweight technology. In addition, being overweight energy also was a major contributor in the quarter to our out-performance.
Our large cap portfolio delivered an out-sized portion of the contributions in the quarter as did the growth-oriented stocks (as categorized by Morningstar).
Our ten biggest contributors in the equity portfolio for the quarter included 5 stocks in energy (energy highlighted in bold): PBF Energy Inc (PBF), ON Semiconductor Corp (ON), Hubbell Inc (HUBB), Hashicorp Inc (HCP), Matador Res Co (MTDR), Albemarle Corp (ALB), Biogen Inc (BIIB), Civitas Resources Inc (CIVI), Devon Energy Corporation (DVN), and Enphase Energy Inc (ENPH).
Our ten stocks that contributed the least to our returns for the quarter: Liberty Energy Inc A (LBRT), Skywest inc (SKYW), Patterson-UTI Energy Inc (PTEN), MRC Global (MRC), Wex Inc (WEX), Helmerich & Payne Inc (HP), Star Bulk Carriers Corp (SBLK), Genco Shipping & Trading (GNK), TTM Technologies Inc (TTMI), and Citigroup Inc (C).
|Ticker||Security Description||Portfolio Weight %|
|PBF||PBF ENERGY INC-CLASS A||1.14%|
|R||RYDER SYSTEM INC||1.11%|
|ESTE||EARTHSTONE ENERGY INC – A||1.11%|
|NOG||NORTHERN OIL AND GAS INC||1.10%|
|HCP||HASHICORP INC-CL A||1.09%|
|SM||SM ENERGY CO||1.08%|
|NEX||NEXTIER OILFIELD SOLUTIONS I||1.07%|
|PR||PERMIAN RESOURCES CORP||1.07%|
As of 09.30.2022. Cash is not included.
AdvisorShares Alpha DNA Equity Sentiment ETF (SENT) Portfolio Manager