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BKCH: July 2019 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/bkch.

Portfolio Review

Since BKCH is not benched to an index, we will compare performance to the largest ETFs in the Cloud and Blockchain space: First Trust Cloud Computing ETF (NASDAQ:SKYY) , Global X Cloud Computing ETF (NASDAQ:CLOU) and Amplify Transformational Data Sharing ETF (NASDAQ:BLOK)

The month of July saw the AdvisorShares Sabretooth ETF (NASDAQ:BKCH) gain 3.26% versus a gain of 1.90% for SKYY, a gain of 1.89% for CLOU and a gain of 2.70% for BLOK (based on market price).

July was another strong month for BKCH, with the market pullback the last few days of the month hitting performance numbers.  Many names in the portfolio had made 52 week highs on July 26 and sold off with the market the last three days of the month. While the portfolio began basically equal weighted, the leaders and laggards have created a portfolio that is spread between 1.20% and 4.66% with most an average security weight in the 3% range.  The top ten holdings mostly had positive returns for the month with only Amazon.com (NASDAQ:AMZN) and Mongo DB (NASDAQ:MDB) being negative. AMZN’s price was up to $2020 on July 15 and over $2000 as late as July 24, but dipped after earnings to end the month at $1866.78. We do not consider the EPS miss with revenue beat for AMZN as a cause for concern since they still had robust growth in AWS and continued to  reinvest profits, hitting their EPS numbers. We still see AMZN as a growth engine, and while it is more susceptible to index selling than most other securities in the portfolio, we believe AMZN’s growth story is still alive and well. MDB had been on a meteoric rise thru June and was up about 4% for July on the 26th, and saw about a 10% sell off the last three days of the month. We still believe MDB is undervalued at current levels and eagerly await its earnings announcement and guidance on September 4th.  Alteryx (NYSE:AYX) was the big gainer again, following its June 25.02% gain with a gain of  7.72% for the month of July.  OKTA Corp (NASDAQ:OKTA) returned 9.08% for the month of June and followed that up with another gain  of 5.93% for July. OKTA earnings come out August 28th with consensus estimates for a loss of 32 cents per share on 131mm in revenue.

There were three trades in the portfolio during the month of July. CrowdStrike Holdings (NASDAQ:CRWD) was partially sold off when it exceeded our target price, and Medallia Inc (NASDAQ:MDLA) was bought at $37.24 and sold again at 441.50 when it exceeded the 10% threshold we envisioned for the stock. 

August continues earnings season for a few of the portfolio holdings, especially the Cloud names. We got a Fed rate cut on July 31 that sent the market reeling on Powell’s reluctance to signal more cuts ahead, and we feel that position BKCH better than most since only about half the portfolio is heavily indexed. Meaning half the portfolio can be impacted by index sellers, while half can stand on their own merits without outside pressures from larger index activity.

Top Holdings

Ticker Security Description Portfolio Weight %
AYX ALTERYX INC – CLASS A 4.66%
OKTA OKTA INC 4.48%
AMZN AMAZON.COM INC 4.29%
MDB MONGODB INC 4.15%
MSFT MICROSOFT CORP 3.56%
MA MASTERCARD INC – A 3.56%
V VISA INC-CLASS A SHARES 3.50%
TWLO TWILIO INC – A 3.43%
ANET ARISTA NETWORKS INC 3.41%
ZEN ZENDESK INC 3.41%

As of  07.31.2019.

 

Respectfully,

Scott Freeze, CIO
Sabretooth Advisors
AdvisorShares Sabretooth ETF (BKCH) Portfolio Manager

Past Manager Commentary

Definitions:

The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks. One cannot invest directly in an index.

The Nasdaq Composite Index is the market capitalization-weighted index of approximately 3,000 common equities listed on the Nasdaq stock exchange.


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. Computer software/services companies can be significantly affected by competitive pressures, aggressive pricing, technological developments, changing domestic demand, the ability to attract and retain skilled employees and availability and price of components. Many computer software/services companies rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and protect their proprietary rights in their products and technologies. There can be no assurance that the steps taken by computer software/services companies to protect their proprietary rights will be adequate to prevent misappropriation of their technology or that competitors will not independently develop technologies that are substantially equivalent or superior to such companies’ technology. Stocks of technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market. Additionally, companies in the technology sector may face dramatic and often unpredictable changes in growth rates and competition for the services of qualified personnel. For other risks specific to the fund please read the prospectus.

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 any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.