Shares of Netflix (NasdaqGS: NFLX) are down 22% Thursday on volume that is already more than quadruple the daily average after the streaming content and entertainment provider said it added 3.02 million streaming subscribers, well below company-issued guidance of 3.69 million subscribers. Netflix added 2.04 million international subscribers, also below previous guidance of 2.36 million.
In theory, that tumble should be enough for some bearish fund managers that have been short Netflix to cover part of their positions and realize some profits. The mangers of the actively managed AdvisorShares Ranger Equity Bear ETF (NYSEArca: HDGE), which is subadvised by Ranger Alternative Management, apparently see more downside ahead for Netflix because they are not covering any shares today, according to an email (below) from HDGE co-manager Brad Lamensdorf.
HDGE, which will celebrate its fourth anniversary in January, is home to nearly $190 million in assets under management. To be fair, Netflix is not a significant percentage of the ETF’s short portfolio. At a weight of 0.95%, Netflix’s weight in HDGE is larger than nine of the ETF’s other holdings. As a result, the ETF is flat on the day at this writing, but volume is nearly 40% above the daily average. [Bearish ETFs for Volatile Markets]
However, HDGE is one ETF that has recently enjoyed the broader market’s recent meltdown. The ETF is undeniably doing its job with an 8.5% gain over the past month while the S&P 500 is down 7.4% over the same period.
HDGE’s advantages do not come cheap. “Shorting stocks is expensive. HDGE’s expense ratio is 1.65 percent of assets, and its total expenses add up to 3.29 percent of the amount an investor puts into it, charged annually. The fees can add up because HDGE has to pay interest and dividends when it borrows stocks to short,” reports Eric Balchunas for Bloomberg.
HDGE’s largest short is almost 4.5% of the ETF’s weight directed toward Dow component International Business Machines (NYSE: IBM). HDGE is also short two well-known ETFs: The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP) and the Market Vectors Oil Service ETF (NYSEArca: OIH). Those ETFs combine for 3.1% of HDGE’s weight. [Netflix Slide Could be Bad for These ETFs]
AdvisorShares Ranger Equity Bear ETF
