Select Page

FWDI: October 2018 Portfolio Manager Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/fund/fwdi.

Performance Review

During the month of October, international markets responded negatively to uncertain relations between the U.S. and China, oil price instability and a month-long sell-off of US stock. FWDI underperformed the MSCI EAFE Index in October with a return of -8.41% in NAV while the benchmark returned -7.96%.

Source: Morningstar; as of 10/31/2018.

FWDI realized negative returns for investors due in part by oil price volatility. Three top holdings in the portfolio BP PLC (NYSE: BP) and Royal Dutch Shell Class A (NYSE: RDS.A) and Royal Dutch Shell Class B (NYSE: RDS.B) all delivered a negative return with -5.92%, -7.26% and -7.36% respectively, due to oil prices sinking down to the lowest price in recent years. However, no holding in the portfolio experienced a lower return than Silicon Motion Technol-ADR (NYSE: SIMO) returning -30% due to uncertain trade relation between the US and China as well as a massive sell-off of US and tech stocks.

Top 10 Holdings

FWDI Top 10 Holdings (10/31/2018)

Ticker

Portfolio Weights

October Returns

ROYAL DUTCH SHELL-SPON ADR-A

RDS/A

4.42%

-7.26%

BP PLC-SPONS ADR

BP

4.38%

-5.92%

TERNIUM SA-SPONSORED ADR

TX

4.31%

5.12%

ROYAL DUTCH SHELL-SPON ADR-B

RDS/B

4.30%

-7.36%

VEON LTD

VEON

3.74%

-3.10%

TENARIS SA-ADR

TS

3.48%

-12.80%

EQUINOR ASA-SPON ADR

EQNR

3.25%

-8.87%

ERICSSON (LM) TEL-SP ADR

ERIC

3.16%

0.68%

ARCELORMITTAL-NY REGISTERED

MT

3.09%

-19.35%

SILICON MOTION TECHNOL-ADR

SIMO

2.99%

-30.00%

Source: Morningstar

Outlook

The portfolio had a mixture of both positive and negative returns for the month of October as a result of the volatile economic environment. However, through this volatility we at Madrona are confident in the ability of investors to recognize and follow signals of the fundamental drivers that move sustainable appreciation. While U.S. unemployment rates remain constant at 3.8% and global GDP continues to remain favorable, notably in the U.S. and China. EPS and revenue growth across the overall global equity marketplace nonetheless remain strong despite mounting concerns over trade disputes.

While risks of escalating economic sanctions between countries threaten future economic expansion, we believe that the historically healthy international business environment will be conducive to continued expansion. We believe investors should remain focused on the long-term growth from fundamentals that will promote continued appreciation. We look forward to the months to come and hope to continue our mission of generating globally-diversified returns for FWDI investors.

Respectfully,

The Madrona Funds Portfolio Management Team
AdvisorShares Madrona International ETF (FWDI) Portfolio Manager

Definitions:

MSCI EAFE Index is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. One cannot invest directly in an index.

Forward Price To Earnings (Forward P/E) is a measure of the price-to-earnings ratio (P/E) using forecasted earnings for the P/E calculation. While the earnings used are just an estimate and are not as reliable as current earnings data, there is still benefit in estimated P/E analysis. The forecasted earnings used in the formula can either be for the next 12 months or for the next full-year fiscal period.

Forward PEG Ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share, and the company’s expected growth. In general, the Forward P/E ratio is higher for a company with a higher growth rate. It is the opinion of Madrona Funds, LLC that using just the Forward P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the Forward P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. When calculating the weighted average forward PEG of the fund, data for any securities with negative or unavailable growth or earnings projections have been removed for calculation purposes. The forward PEG of each security is a tool used to determine whether the individual security is over or undervalued. The lower the forward PEG, the cheaper the security is relative to its projected earnings and growth.


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.

There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. To the extent that the Fund’s investments are concentrated in a particular country or region, the Fund will be susceptible to loss due to adverse market, political, regulatory and geographic events. The Fund is subject to an increased risk of price volatility associated with emerging markets and negative impact due to currency exchange rate fluctuations. Other Fund risks include market risk, equity risk, large cap risk, early closing risk, liquidity risk, trading risk, foreign investment risk, and geographic concentration risk. See prospectus for details regarding risk.

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.