An actively managed ETF that bets against stocks by shorting them has profited recently from some well-timed positions in troubled companies.
The $264 million AdvisorShares Active Bear ETF (NYSEArca: HDGE) is up 15.7% for the three months ended June 8, compared with a 2.4% decline for the S&P 500, according to investment researcher Morningstar.
The ETF enjoyed a “windfall” last month when shares of Green Mountain Coffee Roasters (NasdaqGS: GMCR) tumbled 48% on disappointing earnings, The Wall Street Journal reports.
The fund is co-managed by John Del Vecchio and Brad Lamensdorf. [Chart of the Day: Active Bear ETF]
Del Vecchio has a background in forensic accounting and hunts for companies that are aggressive in their accounting practices, a sign that they may be trying to paper over a decline in the business. These companies are shorted on the expectation they will miss earnings or lower guidance.
While Del Vecchio concentrates on the fundamentals, co-manager Lamensdorf specializes in technical analysis. [ETF Spotlight: HDGE]
AdvisorShares Active Bear ETF is not tied to an index. The fund doesn’t use leverage or derivatives, and the portfolio is transparent – investors can see the individual holdings.
Currently, the ETF’s largest short positions are in Goodyear Tire (NYSE: GT), Citigroup (NYSE: C) and Best Buy (NYSE: BBY). [Short ETFs to Play Defense]