As a market pullback goes underway, investors can include equity exchange traded funds that focus on a bearish investment strategy to help hedge against further weakness.
For example, the AdvisorShares Ranger Equity Bear ETF (NYSEArca: HDGE), which is subadvised by Ranger Alternative Management, selects short positions based on fundamentals, such as low earnings or aggressive accounting, as a way to target some of least financially sound companies in the U.S.
Additionally, the AdvisorShares Athena International Bear ETF (NYSEArca: HDGI), which is subadvised by AthenaInvest Advisors, provides investors with a hedged international play. The fund tries to generate capital appreciation through short sales of international equities. The managers essentially utilize behavioral financing to identify some of the worst stocks in the global market to short.
Over the past month, HDGE is up 3.0% while HDGI gained 1.7%. In comparison, the S&P 500 is down 1.4%.
Stock observers are warning about bearish market signals, including excessive bullish enthusiasm, overvaluation based on price-to-earnings and extreme divergences in market sectors, the Wall Street Journal reports.
Hayes Martin, president of Market Extremes, points out that no bear market has occurred without these three signals.