With bond yields at historic lows and equities near all-time highs, investors seek alternatives for income generation and risk mitigated capital appreciation. Other sources include dividends and long-short strategies. The Leatherback Long/Short Alternative Yield ETF (LBAY) can be a one-stop strategic solution and the Fund enters 2021 well positioned.
LBAY’s largest position entering the year, FLIR Systems (FLIR) announced January 4, 2021 that it will be acquired by industrial instruments and software company Teledyne Technologies (TDY) in a transaction valued at about $8 billion. FLIR is a maker of thermal imaging cameras as well as defense and industrial threat-detection sensor equipment. The cash and stock deal would value FLIR at $56 per share, representing a 28% premium above FLIR's closing price on December 31, 2020. The premium is also 40% above the 30-day volume-weighted average shares price as of December 31.
In December, LBAY appreciated approximately 5.23% compared to 3.84% for the S&P 500 Index. Since inception on November 17, 2020, the Fund has returned 4.57% versus 4.26% for the S&P 500 Index. Key contributors to returns included dividends and shorts. For standardized fund performance click here.
LBAY maintains a bias towards dividend awards because they are instrumental to investors’ long-term total returns and they also help insulate from rocky market periods. LBAY is actively managed and seeks both income generation and risk-mitigated capital appreciation by investing in a concentrated long portfolio of high shareholding yielding equities and income-producing securities. Below we highlight multiple companies that have either raised or declared special dividends since we invested.
The Fund’s highest net long sector exposures include financials, materials and real estate, each of which maintain strong dividends and benefit from potentially higher rates and inflationary pressures. In the financial sector, long positions include Popular (BPOP), Ameris Bancorp (ABCB), Old Republic International (ORI), and WisdomTree Investments (WETF), all mid-cap names that we believe are well-positioned to benefit from improved economic activity in 2021.
In the materials and real estate sectors, our long positions include PotlatchDeltic (PCH), Newmont (NEM), Rio Tinto (RIO), and Nutrien (NTR). As the economy picks up speed, these sectors may benefit from inflation pressures.
LBAY DIVIDEND CHANGES AND SPECIAL CASH DISTRIBUTIONS
*change vs. last special cash dividend per share
Additionally, LBAY takes short positions in idiosyncratic securities we believe will decline in price. As we enter 2021, Leatherback has short positions in names that we believe had significant pull forward in demand for their goods and services due to the global pandemic. For example, Zoom Video Communications (ZM) was a profitable short in 2020 and we continue to be short, along with Peloton Interactive (PTON) and Logitech International (LOGI).
With bond yields at historic lows, passive strategies too often with misunderstood or misattributed risks, and active mutual funds or hedge funds with onerous lockups and high fees, investors need new solutions. With LBAY, investors now have a powerful tool for adding alternative yield to their portfolios, guided by experienced active management.