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DBLV: February 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

Performance Review

The AdvisorShares DoubleLine Value Equity ETF (DBLV) posted a positive return of 2.99% in February 2019, lagging its benchmark, the Russell 1000 Value Index, by 21 basis points. 

The broader large-cap equity rally sustained itself through February, as expectations of a trade agreement with China increased and fears of a Fed-induced recession receded. The market continued to respond favorably to Chairman Jerome Powell’s prior month’s signal that central bank policy had shifted back to a more accommodative monetary stance, resulting in asset prices further rebounding on expanded valuation multiples. Value stocks underperformed growth counterparts again this month. The S&P 500 Index posted a return of 3.21% during the month, while the Russell 1000 Value Index rose 3.20%, and the Russell 1000 Growth Index posted 3.58%. Despite the modest, relative underperformance of value stocks in the month, we continue to expect value stocks to display better relative performance vis-à-vis growth names over the medium to long term.

In terms of sector attribution, monthly performance for DBLV was helped by exposures within information technology, consumer staples, communication services, and real estate, offset by negative contribution within health care, consumer discretionary, energy, industrials, financials, materials, and utilities. Cash had a negative impact in a rising market. 

Monthly Performance by Sector

Source: Bloomberg. As of 02.28.2019.

The top three positive contributors to performance in February were Astrazeneca Plc (AZN), Motorola Solutions Incorporated (MSI) and Philip Morris International (PM):  

  • AZN (healthcare) is a UK-based pharmaceutical manufacturer with leading franchises in oncology, respiratory, and cardiology. AZN had a strong Q4 earnings report, with better-than-expected revenue driven by oncology products. Better-than-expected 2019 guidance, supported by continued high-single-digit revenue growth and operating leverage, validated our fundamental investment thesis. We see AZN posting best-in-class revenue and earnings growth over the next five years, driven by ramping sales of recently-approved oncology blockbusters. 
  • MSI (information technology) is a vendor of communication devices, accessories, software and services, primarily supplying federal, state and local governments. We view MSI’s business as attractively positioned over the long term.  Because many first responders rely on its mission-critical solutions during emergencies, MSI competes more on product and service reliability than on price, thereby limiting competition and boosting customer renewal rates. During February, MSI’s stock reacted favorably to an above-consensus quarterly earnings report, increased revenue backlog and higher revenue and earnings guidance. 
  • PM (consumer staples) is the leading supplier of cigarettes and related tobacco and reduced-risk products outside the U.S. In February, the stock continued to rebound from the overly negative sentiment related to the competitive threat posed by such leading vaping product suppliers as Juul. Quarterly results helped in this regard, as they showed further growth in market share and volumes for PM’s reduced-risk products in key European markets. We view the perceived risks related to the international expansion of vaping products as overdone, since the regulatory environment for vaping products in foreign markets is actually stronger than in the U.S. where Juul has grown its share. Given its currently attractive valuation, the stock provides our portfolio with desirable defensive characteristics and a favorable risk-reward profile.

The top three detractors from monthly performance were CVS Health Corp. (CVS), Cigna Corp. (CI) and Sanofi (SNY):

  • CVS (healthcare) is the leading retail pharmacy and pharmacy benefits manager (PBM) in the US and also one of the largest managed care providers. CVS stock struggled as initial 2019 earnings guidance was worse than expected, driven primarily by headwinds in the retail pharmacy business; specifically, weakness in the long term care (LTC) pharmacy business, and a relatively subdued generics contribution year, along with continued reimbursement pressures, explained the weak projections and stock price action. These headwinds, however, should abate by 2020. More fundamentally, the market is overly pessimistic about CVS’s growth prospects, and does not yet appreciate that the company is well-positioned to lower healthcare costs across the system and thus to generate higher profits. At ~8x 2020 P/E, CVS is currently one of the cheapest large cap healthcare stocks, but it should re-rate as the market comes to appreciate the strengths of its collection of assets. 
  • CI (healthcare) is an integrated managed care provider and PBM. The stock declined during the month on disappointing fourth-quarter results and initial 2019 earnings guidance. We view the initial guidance as conservative for a variety of factors and expect CI to exceed these targets. Longer term, we view the market as overly fearful of increased potential regulation of PBMs, including the elimination of drug rebates, which comprise only a low-single-digit percentage of CI’s overall earnings. We would expect the stock to re-rate positively as the industry moves towards newer economic models emphasizing lower overall drug costs, a development that leverages the key strengths of the company. 
  • SNY (healthcare) a French pharmaceutical manufacturer with therapeutic focus areas within rare diseases, oncology, diabetes, immunology and hematology, as well as vaccines and consumer health. Although SNY gave initial 2019 earnings guidance that was slightly ahead of expectations, the market was disappointed by the lack of a more formal cost restructuring announcement from the company’s new CFO. SNY it is one of the cheapest pharmaceutical stocks, at approximately ~11.5x 2020 P/E, even though the company is growing sales only slightly slower than its peers, and despite the fact that it is facing one of the fewest numbers of patent expiries over the next 5 years (i.e., ~5% of total revenue versus ~20-60% for the rest of the industry). Over time, improved R&D productivity will translate into better sales and profit growth, thereby boosting the stock

During the month, we introduced TJX Companies (TJX) as a new holding. We also added to our positions in the following:  Microsoft (MSFT), Cigna Corp. (CI), Sanofi (SNY), and Anadarko Petroleum (APC). We reduced our positions in Anthem (ANTM), Dollar Tree (DLTR), Bayer AG (BAYRY), Chevron (CVX), International Paper (IP) and Google (GOOGL).

Top 10 Holdings

The top ten portfolio holdings, by weight and active weight, can be seen in the following tables:

Top 10 Portfolio Weights     Top 10 Portfolio Active Weights  

As of 02.28.2019

Active weight refers to the difference in allocation of an individual security or portfolio segment between a portfolio and its benchmark. For example, if a portfolio allocates 15% within the energy sector, and the benchmark’s allocation in energy is 10%, then the active weight of the energy segment of the portfolio is +5%. Active weight can also be referred to as relative weight.


Relative to its benchmark, the Russell 1000 Value Index, the portfolio is overweight healthcare, consumer discretionary, information technology and communication services. It is approximately equal-weight energy and industrials, and it remains underweight the bond-proxy sectors (i.e., utilities, REITs and consumer staples), as well as financials and materials. We continue to hold opportunistically excess cash at the moment. The portfolio holdings by sector in terms of both absolute and relative weights can be seen in the accompanying charts:

As of 02.28.2019

The DBLV portfolio’s sector exposures primarily reflect the DoubleLine Equities team’s bottom-up investment process, which places an emphasis on individual stock selection. However, the macroeconomic views of DoubleLine Capital LP do inform secondarily these sector weightings.


We are constructive on the long-term outlook for the U.S. equity market, but remain cautious in the near-term, because of continued uncertainties related to the ongoing trade dispute with China and the longer-term prospects for higher rates and tighter monetary policy conditions, which remain in place despite a more dovish Fed due to chronic deficit spending that increases the supply of debt. We are also increasingly concerned about the sustainability of high corporate profit margins, the risk of slower earnings growth and the prospect of downward pressure on valuation multiples, all of which constitute near-term headwinds.

In this environment, we continue to believe that value stocks should post better relative performance after having lagged growth stocks for nearly a decade. Indeed, compared to the broader S&P 500, the relative earnings multiples of value stocks in general and of the DBLV holdings in particular appear attractive at current levels. At month’s end, the price-to-earnings multiple on 2019 consensus estimates for DBLV was 15.2x, the Russell 1000 Value Index 14.4x, and the S&P 500 16.9x.

In conclusion, we regard the current environment as supportive of the value-based strategy behind DBLV—particularly over a long-term investment horizon.

We thank you for your continued interest in DBLV.


Emidio Checcone
DoubleLine Capital
AdvisorShares DoubleLine Value Equity ETF (DBLV) Co-Portfolio Manager

Brian Ear
DoubleLine Capital
AdvisorShares DoubleLine Value Equity ETF (DBLV) Co-Portfolio Manager


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 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. Investing in mid and small capitalization companies may be riskier and more volatile than large cap companies. Because it intends to invest in value stocks, the Fund could suffer losses or produce poor results relative to other funds, even in a rising market, if the Sub-Advisor’s assessment of a company’s value or prospects for exceeding earnings expectations or market conditions is incorrect. 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.

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.