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[转贴] The New Way to Bet Against the Market

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发表于 2018-9-29 02:54 PM | 显示全部楼层 |阅读模式




It’s no secret that a handful of stocks have been driving the market.

During the first half of 2018, four top performers— Amazon.com(ticker: AMZN), Microsoft(MSFT), Apple(AAPL), and Netflix(NFLX)—were responsible for 84% of the S&P 500’s return, according to Goldman Sachs.
Given the momentum of those stocks, it makes sense that short sellers betting against others in the benchmark would have an edge. Yet if you look at the universe of short exchange-traded funds, the most popular ones blindly track benchmarks full of hot tech stocks, promising one, two, or three times the inverse of the daily returns of the S&P 500 or Nasdaq 100.

RELATED DATA
Market Data Center: ETF Research
Enter the AdvisorShares Dorsey Wright ShortETF (DWSH). Launched in July, it is one of just four actively managed bear-market ETFs that don’t seek to invert an index’s return. Subadvisor Nasdaq Dorsey Wright employs a proprietary stock-ranking system based on the strength or weakness of price moves relative to the market. The ETF shorts the market’s weakest 80 to 100 mid- to large-cap stocks and updates its portfolio weekly, adding new companies that have weak performance or selling weaklings that have recovered. As long as Amazon and Apple have positive momentum, the ETF won’t bet against them.

“There’s a long history of academic research showing that weak momentum stocks tend to dramatically underperform the market over time,” says John Lewis, senior portfolio manager of Nasdaq Dorsey Wright. Although the ETF can change its portfolio weekly, that doesn’t mean it will. “It all depends on the overall character of the market and how stable the leadership ranks are,” he says.

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As of Aug. 31, the ETF’s largest short sector position—28% of its portfolio—is in consumer cyclical stocks such as L Brands(LB), which owns Victoria’s Secret and is down by almost half this year. It’s precisely such retail stocks that are suffering from the Amazon effect. Also, the ETF has an 21% short weighting in industrial stocks such as Colfax(CFX).

Another newcomer with a negative momentum strategy is the Virtus Enhanced Short U.S. EquityETF (VESH), which launched in June 2017. Its strategy is less focused, with half of its portfolio in short S&P 500 futures, while the rest is in short positions on the five weakest-performing sectors in the past nine months.

While Dorsey and Virtus are quantitatively run, investors seeking hands-on active management should check out the AdvisorShares Ranger Equity BearETF (HDGE). Co-managers John Del Vecchio and Brad Lamensdorf have run a short hedge fund for Ranger Alternative Management since 2007. Before that, they cut their bear choppers at David W. Tice & Assoc. of the Federated Prudent Bearfund (BEARX) and at legendary billionaire hedgies, the Bass brothers, respectively.

The team’s skills were on full display at Ranger’s hedge fund, where their short portfolio gained 80% net of fees in 2008, without using leverage or derivatives, as the S&P 500 fell 37%.

The Ranger ETF, which launched in January 2011, generally gains more than the inverse of the S&P 500 during slides and holds up reasonably well versus its indexed peers when the market rises. In five out of six down periods for the S&P 500 since its launch, The ETF beat the market’s inverse, often by a significant margin. Notably, when the market was down 18% from July 22 through Oct. 3 in 2011, the ETF was up 30%, and when the market fell 9% from April 2 to June 4 in 2012, it rose 22%. And this is without the terrible results suffered by leveraged short ETFs during rallies. Over the past five years, the ETF has lost 12.5% annualized, while the S&P 500 has gained 13.8%.

Lamensdorf and Del Vecchio do forensic analyses of companies’ financial documents to see if they are fudging their numbers. “We’re looking for companies that are what we call ‘pulling forward their revenue,’ ” Lamensdorf says. That’s when companies book expected sales revenues in advance to conceal a slowdown, forcing them to play catchup to make up for revenue they’ve already recognized. Companies falter if growth doesn’t materialize. The advantage of the fund’s strategy is that it doesn’t require market declines to profit, only for a company’s fundamental weakness to become apparent.



Of course, owning any bear ETF in a bull market can be a painful experience. For those who still want upside but are worried about the downside, WisdomTree Dynamic Bearish US Equity(DYB) might be a wise choice. Depending on the stock market’s average of certain growth metrics—cash flow, earnings, and sales—and valuation metrics—price-to-book and price-to-sales ratios—this ETF will shift from a bullish to neutral or bearish mode.

Fully bullish means 100% of the portfolio is on the long side in 100 stocks that the ETF screens for attractive growth and value characteristics, while 75% is hedged with short S&P 500 futures—a 25% net-long position. In neutral, the same portfolio is 100% hedged, while in a bearish mode, the ETF shifts out of stocks entirely into Treasury bonds and short S&P futures.

Right now, the WisdomTree ETF remains bullish, although it has been fully bearish three times since its December 2015 inception. Despite that, it has managed to deliver positive returns every year since then. With a modest 0.48% expense ratio that’s less than the average inverse ETF, it’s worth considering almost 10 years into a bull market that’s well past its prime.
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