The Leatherback Long/Short Alternative Yield ETF (LBAY) (the “Fund”) net asset value (NAV) increased by 2.46% in the third quarter of 2025, compared to an advance of 8.12% for the S&P 500 Index. LBAY paid our fifty-eighth consecutive monthly distribution, at $0.076 per share in September. This is a 2.22% SEC yield versus the S&P 500 Index dividend yield of approximately 1.17%, and the 10-Year US Treasury yield of 4.151%*. NAV performance for the Fund to date since inception (November 16, 2020) has produced a 46.03% cumulative total return and an 8.08% annualized total return.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling (833) 417-0090. The gross expense ratio for the fund is 1.27%.
View LBAY standardized performance here.
The Fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. The market price is the most recent price at which the Fund was traded.
*The S&P 500 Index includes 500 leading companies and covers approximately 80% of the available market capitalization. The S&P 500 Dividend Yield is the estimated sum of all dividends paid by the index’s stocks in the last 12 months, divided by the index market capitalization as reported by the S&P. The dividend yield does not represent or predict the performance of the Fund. Indexes are unmanaged and it is not possible to invest in an index. The 30-day SEC yield is calculated with a standardized formula mandated by the SEC. The formula is based on maximum offering price per share and does not reflect waivers in effect. The 30-day SEC yield is calculated from the 30 days ending on the last day of the previous month. This figure reflects income less expenses and approximates the yield an investor would receive in a 12-month period if a fund continues earning the same rate for the rest of the year. View the 30-day SEC yield here. The US Treasury yield reflects the interest rate the US government could expect to pay to borrow money for different periods of time.
FED CUTS RATES, SPIKES THE PUNCH BOWL!
Since bottoming on April 8, 2025, the S&P 500 Index and NASDAQ Composite Index have rallied by 35% and 48% through the end of September, climbing to record highs.1,3,4 At the time of this writing, other asset classes, including housing, bitcoin and gold are also testing or surpassing all-time highs. As of the end of the 3rd quarter, the total US equity market capitalization, valued at around $70 trillion, represents approximately half of the world equity market capitalization of around $145 trillion.5,10 US Households have more exposure to equities than ever before. According to recent Federal Reserve data, stock holdings now account for an all-time high of 45% of US households’ financial assets.6
Historically, this could be a prudent time for the Federal Reserve (Fed) to take away the punch bowl just as the party gets going. 7 Yet, in September, the Fed reinforced market momentum by cutting the federal funds rate by 25 basis points**, while signaling more rate cuts are likely in the near term. The Fed seems unalarmed, or politically blinded, by the stubbornly high inflation readings of more than 2% and has focused on employment reports which have shown signs of softening. Chair Jerome Powell acknowledged “risks to inflation are tilted to the upside, and risks to employment to the downside - challenging situation.” 8 With valuations across risk assets that we think are stretched, and inflationary pressures proving persistent, we believe equity prices are likely to exhibit high volatility over the next several months. In our opinion, it may be an ideal time to add long/short strategies.
EXPERTS RING THE BELL?
As shown in the chart below, markets have risen to extreme levels by almost any measure.9* Yet, with the Fed signaling more interest rate cuts over the next several months, the market continues to march higher. Interestingly, many market participants have been issuing caution signs.
“I’m constructive because of the [interest rate] easing right now, but I’m also miserable because of the levels… one easing or two easings or even three easings don’t matter .” – David Tepper10
“I always use the example of blackjack because it’s a game that most everyone knows and most everyone has played. Well, let’s say that you have a 19, and you have the option of hitting, is anyone in their right mind going to hit on a 19? The answer is no, absolutely not, because the odds are against you. But that doesn’t mean that if you do hit, you can’t get 21. You can still get a 2…. The S&P 500 right now is basically hitting on a 19.” – George Gammon11
“Try not to get caught up in the madness. Right now, there’s as much madness in the stock market as I have ever seen… The madness continues and people keep (rolling) the dice. They keep making the bet, they keep being short-term…. It’s like 1999. But, eventually you will get in a situation where people will have to look at things for what they really value in terms of an investment” – Ted Oakley12
Indeed, even Chair Powell seems concerned as he stated, “…by many measures, for example, equity prices are fairly highly valued.”13 In our opinion, margin debt further illustrates current investor speculative appetite. Margin debt is the amount of money an investor borrows from their broker via a margin account. According to data from FINRA, margin debt reached a new all-time high of $1.06 trillion in August. This debt level is up 32.9% from last year reaching its highest level since November 2021. As shown in the chart below, the last spike in margin debt preceded sharp declines in equity values in 2022.14
CIRCULAR FINANCING
The market leadership since the April lows has been concentrated in the Magnificent 7 stocks and artificial intelligence (AI) themes. The top ten stocks in the S&P 500 comprise nearly 40% of the S&P 500 which is well above the 27% peak reached during the technology bubble.15 In our opinion, the relentless bid in AI stocks has been fueled by multiple announcements that the largest companies will be investing in each other. For example, we highlight the deals that involve OpenAI, which was just valued at $500B after employees sold $6.6B in equity to investors in early October. 16, 17
NVIDIA Corp (NVDA), after spending $100B investing in OpenAI,16 has been on a spending spree investing in 22 companies in September alone. Notably, many of these companies will likely be buying NVDA equipment.18 The AI capex boom has caught the attention of David Einhorn who has warned that it could lead to massive capital destruction.
“The numbers that are being thrown around are so extreme that it’s really, really hard to understand them...I’m sure it’s not zero, but there’s a reasonable chance that a tremendous amount of capital destruction is going to come through this cycle.” – David Einhorn19
While the relentless price momentum in AI-related stocks may continue near-term, we caution investors to be disciplined and patient. In our opinion, valuations are too extreme and concentrated, and there are more attractive places to invest capital.
PORTFOLIO REVIEW20**
Our current positioning in our long book reflects many long positions that we view as undervalued with near-term catalysts. On the short side of the ledger, we see ample opportunities of overvalued and overhyped companies with what we think are material risks to the downside.
We recently added a new long position in Amrize Ltd (AMRZ) which was spun off from the Swiss multinational company Holcim Limited on June 23, 2025. AMRZ, based in Chicago, is presently a $27B market cap company that is the largest provider of cement in the United States and Canada by sales and production volume, the second largest commercial roofing company and a leader in advanced wall systems21. We find the aggregates business attractive in the US as there are few players, and new competitors are rare as it’s nearly impossible to establish new cement operations given the environmental hurdles. While not immune to a challenging economic environment, we believe AMRZ is attractively valued. AMRZ trades for a substantial discount to peers Martin Marietta Materials (MLM) and Vulcan Materials Company (VMC), which are both valued at approximately 18x EV/EBITDA and over 30x 2026 earnings estimates. AMRZ is expected to generate $3B in EBITDA in 2025 and earn around $2.75 in 2026 which represents over a 10x EV/EBITDA multiple and under 18x P/E. Additionally, we expect the company to initiate a dividend and share buybacks in the coming quarters.21 AMRZ is currently a top ten position in our Fund.
We maintain a short position in Carvana Co (CVNA). CVNA maintains a $75B market cap and presently trades at approximately 4.8x EV to Sales and just under 65x earnings. CVNA operates an online platform for retail customers to buy and sell used cars. Additionally, the company facilitates and securitizes used car loans to complete the online sale for customers. We think of CVNA as maintaining an “originate to sell model” that is tilted toward subprime borrower loans as the average FICO score is typically below 600.22 Interestingly, competitor Carmax, Inc (KMX), who also securitizes used car loans, has declined by over 20% after reporting disappointing earnings in September. During KMX recent quarter, the company experienced a surge in the provision for loan losses within the company’s CarMax Auto Finance segment. Interestingly, on September 10, Tricolor Holdings, a securitizer of subprime used car loans, filed chapter 7 bankruptcy causing volatility in their used car auto asset-backed securities.23 We think CVNA pools may not be immune to industry issues and could experience strain in their securitized pools. We view CVNA as a compelling short at today’s levels.
We are short the stock of Credo Technology Group Holding Ltd (CRDO). CRDO is a $25B market cap semiconductor company that manufactures active electric cables for a handful of customers. The company trades for over 25x EV to Sales with projected $960mn revenues for 2026. CRDO is deemed an AI winner as its active electric cables are used in future datacenters. We think the valuation is expensive and we believe the extreme customer concentration, with three customers comprising 88% of revenues, does not warrant such a premium valuation. Notably, named executive officers have been selling CRDO stock since the recent rally.
View LBAY top 10 holdings here. Holdings are subject to change. Characteristics and metrics of the companies shown are for the underlying securities in the fund’s portfolio and do not represent or predict the performance of the fund. There is no guarantee that a company will pay or continually increase its dividend.
FINAL THOUGHTS
We hope our investor partners enjoy our monthly perspectives. We are finding many compelling ideas both long and short and we look forward to continuing our dialogue in the weeks and months ahead.
