DWEQ: June 2020 Portfolio Review
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/etfs/dweq.
Nasdaq Dorsey Wright has been a trusted partner for advisors since the 1980’s when the original team faxed Point and Figure charts from a small office in Richmond, Virginia. In the 90’s we began to implement our research into managed portfolios, later we introduced Mutual Funds, structured products and ETF’s. All of our strategies are based on simple idea, buy the winners and let them run. We systematically manage all of our portfolios to a set of rules that allows us to be objective and remove the emotion. It does not matter how a particular analysts feels about a stock (positive or negative), we follow our strict buy and sell process. This has, in our opinion been a hallmark of our success across a variety of asset classes.
For the AdvsorShares Dorsey Wright Alpha Equal weight ETF (DWEQ) we continue to deploy investment ideas that have shown value over time. The first idea is that sectors showing strong momentum will often outpace the broad market and the sectors that show less favorable momentum. This is achieved through overweighting to strong companies to capture upward momentum, as well as removing or reducing allocations to trouble areas. Prime examples are reducing or removing energy exposure during the oil sell off of 2015 or overweighting technology over the past decade. The second idea is that being overly diversified dilutes momentum returns by forcing the portfolio to own names that are not as strong. This is implemented by reducing the total number of portfolio holdings to a manageable number.
Combining both of these ideas gives us a portfolio of names that are equally weighted in the three sectors that are showing the strongest momentum. The roughly 50 names in the portfolio are equally weighted and are rebalanced every time the portfolio makes a change. This pushes the portfolio to hold the top names in each sector.
|As of 6.30.2020||1 Month||Since Inception*|
|AdvisorShares Dorsey Wright Alpha Equal Weight ETF – DWEQ||Market||4.13%||-18.37%|
|S&P 500 Index||1.99%||-3.08%|
* DWEQ’s inception date was 12.26.2019.
Portfolio & Holdings
2020 has continued to be a record year. So far this year we have seen unemployment across the globe rise to record levels (the U.S. unemployment rivals the great depression), equity markets sold off at a record speed which pushed the US market into a bear market and oil moved into negative territory as demand has deteriorated. Since the depths of the market sell off at the end of March, the equity market just as quickly pulled itself out of a bear market, also in record time. At the end of the quarter the portfolio was fully allocated to cash in response to the rapid market drawdown. This extra cash helped to buffer some of the downward volatility, however it has presented a drag on performance as the market rocketed off of the lows. June continued this trend as broad based markets continued to rebound. Currently the portfolio is almost equally split between Technology, Consumer Discretionary and Health Care. Technology was the largest positive force in the portfolio this month and helped the portfolio to outpace the broad markets.
|Ticker||Security Description||Portfolio Weight %|
|TTD||TRADE DESK INC/THE -CLASS A||3.08%|
|MPWR||MONOLITHIC POWER SYSTEMS INC||2.76%|
|BBY||BEST BUY CO INC||2.63%|
|EPAM||EPAM SYSTEMS INC||2.63%|
|ERI||ELDORADO RESORTS INC||2.60%|
As of 6.30.2020.
NOTE – DWEQ’s strategy utilizes defensive investing features, allowing it to gradually add cash based on overall market momentum indicators. The turbulence in the equity market, combined with the fund’s tactical move to cash, caused the fund to underperform the broad market.