Select Page

DBLV: November 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

Performance Review

The AdvisorShares DoubleLine Value Equity ETF (DBLV) posted a return of 2.79% in November 2018, lagging by 20 basis points its benchmark, the Russell 1000 Value Index. 

The broader large-cap equity universe posted positive returns in November, following a difficult month for the asset class in October, with value stocks outperforming their growth counterparts. The S&P 500 Index rose 2.04% during the month, while the Russell 1000 Value Index rose 2.99%, the Russell 1000 Growth Index 1.06%. 

As noted in DBLV’s inaugural commentary, we expect value stocks to post relatively better returns after a record period of underperformance relative to growth equities. This outlook is based upon multiple factors, including the relative valuation of value versus growth and the ongoing shift toward more restrictive monetary conditions—a supportive development for the relative performance of value versus growth in past tightening cycles. Over the last couple of months, value stocks have outperformed growth equities. We expect this divergence to continue.

In terms of attribution, monthly performance for DBLV was boosted by portfolio positions in the communication services, consumer discretionary, consumer staples, financials and industrials sectors, and offset by negative contribution within the healthcare, materials, real estate and utilities sectors (n.b.: REITs posted positive selection but negative allocation effects). Energy had a neutral impact, while cash had a modest negative impact in an up market.

The top three contributors to performance in November were US Foods Holding Corp. (USFD), Willis Towers Watson PLC (WLTW) and Amgen Inc. (AMGN):

USFD (consumer staples) is a leading foodservice distributor. The company posted healthy results in its most recent quarter, beating expectations and marking an improvement in the operational issues which had plagued prior results. USFD boasts scale and network economies allowing it to gain share within a fragmented industry in which the top three players hold only 40% of the market. Moreover, USFD can further boost margins on growth in higher-profit areas, such as private label and independent restaurant chains.

WLTW (financials) is a leading insurance brokerage and benefits consulting business. The company posted solid results in its most recent quarterly earnings release. The legacy Willis brokerage operations are expected to improve post the merger in terms of margins and free cash generation, while the overall company should enjoy meaningful cost synergies and tax savings related to the merger. We believe this will allow the company’s valuation multiples to re-rate upward relative to industry peers.

AMGN (healthcare) is a leading, diversified biotechnology company. The company posted solid results in its most recent quarter, and continues to exceed rather depressed expectations of growth prospects. We view AMGN as a preferable, higher-returning alternative to most traditional pharmaceutical companies. AMGN enjoys a similarly diversified portfolio and highly positive cash flow profile while also boasting a more durable product portfolio given the greater difficulty in creating generic alternatives for those products. As such, we regard AMGN as a defensive name with seemingly moderate downside risk given low investor expectations.

The top three detractors from monthly performance were Marathon Oil Corporation (MRO), Halliburton Company (HAL) and Laboratory Corporation of America Holdings (LH):

MRO (energy) is a U.S.-focused E&P company with oil and gas production diversified across four major onshore basins.  Although the company reported operating results which exceeded consensus estimates, its stock price declined primarily due to concerns associated with the fall in oil prices.  The sudden upswing in oil price volatility was a headwind for many E&P companies during the quarter.  MRO has a competitive, low cost structure and should remain highly profitable even at current oil prices.

HAL (energy) is one of the largest energy services companies in the world with dominant positions in many key drilling and completion services market. The company’s results were temporarily impacted by transportation capacity constraints, along with strained customer budgets given the oil price pull back. The transportation issues are expected to be resolved over the next few quarters as incremental pipeline capacity comes online.

LH (healthcare) is a leading provider of lab testing and contract research services. LH took down its forward earnings guidance largely due to industry pressures related to government reimbursement and pricing. As the lowest cost provider in clinical lab testing, an industry with multiple supports for volume growth, LH is best-positioned to deal with pricing headwinds, while the acquisition of contract research organization Covance affords revenue and cost synergies, which should enhance already healthy cash flow.

There were no changes in terms of portfolio names during the month of November. However, the acquisition of Aetna by CVS was consummated during November, as expected, and the combined company will remain in the portfolio and trade under the acquiring company’s ticker.


Top 10 Holdings

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

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 remains overweight the healthcare, communication services, consumer discretionary, financials, industrials, information technology and energy sectors. It is underweight on a relative basis the bond-proxy sectors (i.e., utilities, REITs and consumer staples), as well as 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:

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 secondarily inform these sector weightings. Given the current expectation for rising interest rates, driven by a growing surplus of bonds from the twin impacts of quantitative tightening (i.e., central banks’ net roll-off of balance sheet holdings) and continued deficit spending (i.e., the continued net issuance of new debt), we are particularly cautious on exposures to the bond-proxy sectors, as these have tended to underperform during prior periods of rising rates.


We remain constructive on the longer-term outlook for the U.S. equity market, while recognizing the near-term uncertainties raised by the ongoing trade dispute with China and the prospects for higher rates and tighter monetary conditions, which together raise the risk of slower global economic growth. Our viewpoint is supported both by prospects for corporate earnings that appear healthy even after taking into account moderating growth, as well as by the still-reasonable expectations currently priced into value stocks. 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 year-forward consensus estimates for DBLV was 13.0x, the Russell 1000 Value Index 13.8x, and the S&P 500 18.9x. In conclusion, we regard the current environment as supportive of the value-based strategy behind DBLV—particularly over a long-term investment horizon.



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.