AADR: 3rd Quarter 2022 Portfolio Review
The AdvisorShares Dorsey Wright ADR ETF’s (AADR) strategy uses relative strength to allocate towards the strongest performing ADR’s in the Developed and Emerging Markets. The strategy starts with a top down approach, first ranking each sector based on its relative strength scores and then setting the weighting of each sector. Holdings are scored daily based on an in-house momentum score which compares each security to the peers in the universe. if a securities rank fall below our sell threshold, it is removed. The strategy is not constrained to holding a set allocation to Emerging or Developed Markets, rather the process identifies areas of strength across the globe regardless of geographical location. This allows the portfolio to over or underweight regions and markets to concentrate on areas of strength, often pushing the portfolio to vary dramatically from international benchmarks.
The third quarter was tough for risk assets across the board. A war raging in Europe along with an exceptionally strong US dollar meant that International stocks were not spared either. AADR was still able to outperform the benchmark though (-8.37% AADR vs. -9.36% MSCI ACWI ex-US Index). Most of this performance is due to our exposure to the Energy sector and countries with less representation in the benchmark (India, Brazil, and Indonesia).
AADR’s portfolio continues to be allocated to securities that we believe display favorable relative strength characteristics. At any given time, the portfolio will be comprised of 30-40 US traded ADR’s from our universe of 300-450 ADR’s. Currently, the portfolio consists of 37 securities with weights ranging from ~1.8% to ~4.3% with the top 10 holdings comprising roughly 36% of the portfolio. Petroleo Brasileiro was the best performing stock for the quarter (+25.79), while Sasol was the worst performing stock (-28.47%).
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|IBN||ICICI BANK LTD-SPON ADR||4.32%|
|TTM||TATA MOTORS LTD-SPON ADR||3.97%|
|NVO||NOVO-NORDISK A/S-SPONS ADR||3.69%|
|EQNR||EQUINOR ASA-SPON ADR||3.49%|
|SSL||SASOL LTD-SPONSORED ADR||3.39%|
|DEO||DIAGEO PLC-SPONSORED ADR||3.28%|
|ITUB||ITAU UNIBANCO H-SPON PRF ADR||3.00%|
As of 09.30.2022.
AADR’s portfolio process of focusing on sectors and the strength of holdings allows the portfolio to look much different than the broad market benchmark. The current allocation though is much closer to the benchmark’s allocation when comparing Developed vs. Emerging Market Exposure. This is largely due to the positive relative performance of Developed Markets over the last year as mentioned before as the strategy seeks to rotate into strength. This has started to change though as the relative strength of Emerging Markets has begun to pick up a bit. The portfolio currently stands at 52% Developed vs. 48% Emerging. The country allocations, though, are substantially different. As can be seen below, AADR holds no exposure to Canada, France, Germany, Australia, and Taiwan which are all substantial weights in the benchmark. Instead, we have excess allocations to countries like the United Kingdom and India. At times we’ll own many countries which would never have large allocations in a passive benchmark.
As of 09.30.2022.
The buy/sell process of the strategy starts with a look at the strongest sectors within the universe, overweighting strength and underweighting or eliminating relative weakness. The portfolio continues to be actively allocated to sectors in a materially different way than the benchmark. Notably, the portfolio is most overweight in Healthcare, Communication Services, Utilities, and Energy while most underweight in Consumer Discretionary, Information Technology, Consumer Staples, and Real Estate.
As of 09.30.2022.
John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright ADR ETF (AADR) Portfolio Manager
Past Manager Commentary