TTFS

AdvisorShares Wilshire Buyback ETF

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/ttfs.

June 2018 Portfolio Manager Review


The AdvisorShares Wilshire Buyback ETF (NYSE Arca: TTFS) seeks to generate long-term returns in excess of the total return of the Wilshire US Large-Cap IndexSM. The Fund seeks to achieve this objective by investing in stocks that are currently reducing the amount of floated shares through share buybacks while meeting specific debt and free cash flow criteria. For the month of June 2018, TTFS returned 0.35%, falling short of the benchmark Wilshire US Large-Cap IndexSM, which returned 0.62%. In June, we saw the continued underperformance of value vs. growth stocks, as the Wilshire US Large Cap Value Index returned 0.46%, while the Wilshire US Large Cap Growth Index returned 0.80%, which continues to weigh on the performance of the Fund relative to the broad index.

During the month of June, the Fund underperformed primarily due to security selection in Consumer Staples and Financials. Within the Consumer Staples sector, exposure to Walgreens Boots Alliance Inc. (WBA) was the largest contributor to underperformance, as the stock tumbled on competitive fears due to news that Amazon Inc. is acquiring online pharmacy company, PillPack. Exposure to Conagra Brands Inc. (CAG) also hurt performance as the stock fell on news of its intent to buy Pinnacle Foods. The Fund’s overweight allocation to Financials has continued to plague performance, as this sector continues to lag the broader equity market. Broad based security selection in diversified financials also hurt results with companies such as Voya Financial (VOYA), Fifth Third (FITB), Discover Financial (DFS), and Synchrony Financial (SYF) all falling in excess of 3% during the month. On a positive note, strong security selection in Information Technology and Energy boosted performance during the month. Within Information Technology, Juniper Networks (JNPR), Motorola Solutions (MSI), and HP Inc. (HPQ) were all beneficial to relative performance. In Energy, Anadarko Petroleum (APC), ConocoPhillips (COP) and Kinder Morgan Inc. (KMI) were sizable overweight positions which all outperformed the sector.

The Fund’s bias continues to be towards cyclically sensitive sectors such as Industrials, Consumer Discretionary, and Financials, where we have been witnessing meaningful share buyback activity. Buyback activity has clearly not been rewarded by the market over the past year, and as we have noted in the past, companies that engage in share buybacks are typically more attractively valued. We believe that this value bias has been among the largest negative contributors to relative underperformance over the past year. The last time that we witnessed this type of outperformance of growth vs. value stocks was leading into the technology bubble of the late 1990s. We observe an excessive amount of optimism in growth oriented stocks today, namely Information Technology, and in this environment, we take comfort in knowing that the fund currently trades at a meaningfully cheaper valuation than the Index (a representation of the broader equity market), with a forward P/E of 13.35 vs. 16.65 for the Index. On a cash flow basis, the fund’s price-free-cash-flow (P/FCF) is 14.02 vs. 23.25, substantially cheaper than the Index. Given this dispersion in valuations, we believe that value stocks provide more margin of safety and more total return potential relative to growth stocks. We remain confident in our investment process; we will continue to keep you apprised with insights on our portfolio and results. In the interim, we encourage you to reach out to us with questions.

AdvisorShares Wilshire Buyback ETF

Top 10 Positions   Bottom 10 Positions
DAVITA INC 2.71% NVENT ELECTRIC PLC-W/I 0.24%
JUNIPER NETWORKS INC 2.51% RELIANCE STEEL & ALUMINUM 0.26%
SL GREEN REALTY CORP 2.50% MARKEL CORP 0.29%
WALGREENS BOOTS ALLIANCE INC 2.27% FNF GROUP 0.29%
ANADARKO PETROLEUM CORP 2.26% ALLEGHANY CORP 0.30%
HCA HEALTHCARE  INC 2.21% ROYAL CARIBBEAN CRUISES LTD 0.31%
FOOT LOCKER INC 2.21% NUCOR CORP 0.33%
CONAGRA BRANDS INC 2.10% EVEREST RE GROUP LTD 0.33%
CONOCOPHILLIPS 2.01% LOGMEIN INC 0.36%
CIGNA CORP 1.95% ABBVIE INC 0.38%

 

Respectfully,
Portfolio Manager, TTFS
Chief Investment Officer, Wilshire Funds Management

Josh Emanuel

 


May 2018 Commentary

 

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus which can be obtained by visiting www.advisorshares.com. Please read the prospectus and summary 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. Investing in mid and small capitalization companies may be riskier and more volatile than large cap companies. Other Fund risks include market risk, equity risk, large cap risk, liquidity risk and trading risk. Please 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.

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.

Definitions:
The Wilshire US Large-Cap Index is a float-adjusted, market capitalization-weighted index of the issues ranked above 750 market capitalization of the Wilshire 5000 Total Market Index (Wilshire 5000®).
The Wilshire US Large-Cap Growth Index is a float-adjusted, market capitalization-weighted derivative index of the Wilshire US Large-Cap Index and by extension the Wilshire 5000 Total Market Index (Wilshire 5000®).
The Wilshire US Large-Cap Value Index is a float-adjusted, market capitalization-weighted derivative index of the Wilshire US Large-Cap Index and by extension the Wilshire 5000 Total Market Index (Wilshire 5000®).
The Wilshire 5000 Total Market Index (Wilshire 5000®) is widely accepted as a definitive benchmark for the U.S. equity market, and measures performance of all U.S. equity securities with readily available price data.

A Buyback is the repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.

Important Information
This review contains confidential and proprietary information of Wilshire Funds Management (“WFM”), a business unit of Wilshire Associates, and is intended for the exclusive use of the person to whom it is provided. It may not be disclosed, reproduced or redistributed, in whole or in part, to any other person or entity without prior written permission from WFM.
This material represents the current opinion of WFM based on sources believed to be reliable. WFM assumes no duty to update any such opinions. WFM gives no representations or warranties as to the accuracy of such information, and accepts no responsibility or liability (including for indirect, consequential or incidental damages) for any error, omission or inaccuracy in such information and for results obtained from its use.

Wilshire is a registered service mark of Wilshire Associates Incorporated, Santa Monica, California.

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