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HDGE: April 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/hdge.

Performance Review

For the month of April, the AdvisorShares Ranger Equity Bear ETF (NYSE Arca: HDGE) lost -6.14% while the S&P 500 rose 4.05%.

Performance History (04.30.2019) HDGE NAV (%) HDGE Market (%)
1 Mth -6.14 -6.14
3 Mth -13.58 -13.83
YTD -23.74 -23.75
1 Yr -23.32 -23.39
3 Yrs -14.58 -14.63
5 Yrs -13.01 -13.04

As stated in the Prospectus, the total annual operating expenses are 2.72% (includes 0.17% acquired fund fees). 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 month end performance please visit www.advisorshares.com
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Markets Review

The market recovery had taken sentiment from very pessimistic in January to overly bullish by late April. Sentiment is too optimistic right now, in our view. The wave of bearishness that began late in 2018 had run its course and nearly reversed itself. The following chart, from Investors Intelligence, shows the dramatic swing in sentiment that pushed stocks up 25% to new highs from a bottom on December 24th.  The percentage of bullish advisors has returned to the high 50% range, and the percentage of bearish advisors has dropped to less than 20%. Bearish sentiment is unusually low. It can turn on a dime, fueling a market decline.     

Investors are bidding up cyclicals as recession fears from late in 2018 abate. Bullish sentiment has shifted from growth and momentum stocks to cyclicals.

As recession fears ebb, higher debt levels become less of a concern to investors. They bid up shares of highly levered companies.

Growth stocks are just matching market returns. Investor preference has clearly shifted away from growth and towards favoring the cyclicals.

Stocks were grouped and ranked by the relevant factor as of the end of the prior month and the returns computed for the month just ended. Stocks chosen were based on Two Rivers Analytics’ universe of stocks. © Copyright 2019. All Rights Reserved Two Rivers Analytics. Further Distribution Prohibited without prior permission.

Portfolio Review

For the month of April 2019, the largest realized and unrealized gains were United States Steel Corporation (X), Tanger Factory Outlet Centers, Inc. (SKT), Cooper-Standard Holdings Inc. (CPS), and Alliance Data Systems Corporation (ADS).

United States Steel continued its long slide, falling -19.96% in April. The company faces unprecedented industry-wide capacity increases that are driving fears of steel pricing collapses. There is also concern about the direction of the US trade war with China. We covered this short at a profit. Tanger Factory Outlet Centers fell -13.92% in the month fueled by the continuing “retail apocalypse”, defined as a shift from physical to online shopping. The industry faces a relentless decline in shopping center traffic. Tanger has tried to retool their model but still reported a very weak quarter. Cooper-Standard recovered somewhat in April, rising 7.90%. Cooper suffered from weak automotive demand. It sold its antivibration business early in April. The company suffered a very weak quarter, and we exited the position. Alliance Data Systems dropped mid-month, leaving the stock down -8.50% for April. The company’s sale of its Epsilon data business to Publicis fetched much less than market participants were expecting. We covered the position.

The largest realized and unrealized losses for April were MSCI Inc. Class A (MSCI) , Dover Corporation (DOV) and Wayfair, Inc. Class A (W). MSCI Inc. stock rose 13.35% in April. The company is in a low margin business and the stock is extremely expensive. We exited the position. Dover Corporation crept up 4.52% on the month. Dover is an industrial roll-up with exaggerated expectations of synergies. Wayfair stock rose 9.23% in a volatile month. Wayfair continues to lose increasing amounts of money the more they sell. They continue to bleed cash in an unproven business model, and the stock remains very expensive.

Top 10 Holdings

Ticker Security Description Portfolio Weight %
MKC MCCORMICK & CO-NON VTG SHRS -3.84%
AN AUTONATION INC -3.21%
PTC PTC INC -2.93%
MDRX ALLSCRIPTS HEALTHCARE SOLUTI -2.87%
SKT TANGER FACTORY OUTLET CENTER -2.85%
SNA SNAP-ON INC -2.73%
PBH PRESTIGE CONSUMER HEALTHCARE -2.69%
KMX CARMAX INC -2.59%
BC BRUNSWICK CORP -2.55%
ADS ALLIANCE DATA SYSTEMS CORP -2.26%

As of 04.30.2019. Holdings subject to change. Cash holdings not included.

 

Respectfully,

Brad Lamensdorf
Ranger Alternative Management
AdvisorShares Ranger Equity Bear ETF (HDGE) Portfolio Manager

 

Past Manager Commentary

Definitions:

The S&P 500 Index is a free-float capitalization-weighted index based on the common stock prices of 500 American companies. It is one of the most commonly followed equity indices and many consider it the best representation of the market and a bellwether for the U.S. economy.

Bear Market (Bearish) is a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

Bull Market (Bullish) is a financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

short position is the sale of a borrowed investment with the expectation that it will decline in value.


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. The Fund may invest in (or short) ETFs, ETNs and ETPs. In addition to the risks associated with such vehicles, investments, or reference assets in the case of ETNs, lack of liquidity can result in its value being more volatile than the underlying portfolio investment. Other Fund risks include market risk, equity risk, short sales and leverage risk, large cap risk, early closing risk, liquidity risk and trading risk. Short sales involve leverage because the Fund borrows securities and then sells them, effectively leveraging its assets. The use of leverage may magnify gains or losses for the Fund. See prospectus for specific risks and details.

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.