DWEQ: 1st Quarter 2021 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 AdvisorShares Dorsey Wright Alpha Equal weight ETF (Ticker: 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.
Portfolio & Holdings
The start to 2021 is behaving similarly to the start if 2020 – trends are changing as the markets digest new information. Rather than pricing in a global pandemic, it is pricing in a strong recovery and new presidency that as several different focused than the last administration. This is causing the markets to adopt new trends after a strong end to 2020. This change in trend caused the portfolio to lag the broad markets and have higher than average turnover as new leadership began to take shape. This change over was unfortunately not smooth. Energy rotated into the portfolio as investors began pricing in higher energy/oil prices, it then preceded to struggle causing a drag on the portfolio for the quarter. The other major area of trouble was in Information Technology which had previously been on of the strongest areas of the portfolio, the high momentum names in the portfolio corrected this quarter causing the majority of the losses while the benchmark saw broad support from laggard names. Overall we are not concerned with the quarters results. During periods of leadership change we expect the portfolios to lag the broad markets and to have higher turnover until new leadership is found.
|Ticker||Security Description||Portfolio Weight %|
|LB||L BRANDS INC||2.91%|
|PXD||PIONEER NATURAL RESOURCES CO||2.84%|
|TPX||TEMPUR SEALY INTERNATIONAL I||2.81%|
|DKNG||DRAFTKINGS INC – CL A||2.81%|
|EPAM||EPAM SYSTEMS INC||2.77%|
|BURL||BURLINGTON STORES INC||2.77%|
|LAD||LITHIA MOTORS INC-CL A||2.73%|
As of 03.31.2021.