DWEQ: 3rd Quarter 2022 Portfolio Review
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 by using our systematic analysis to overweight to what we believe are 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 what we have identified as the top names in each sector.
Portfolio & Holdings
Q3 was extremely choppy for equity markets. The S&P 500 Index ended the quarter with a -4.88% return but posted a sizable rally the first half of the quarter followed by a continuation of the year’s bear market in the latter half. DWEQ posted a -8.17% return for the quarter as the 33% cash allocation acted as a drag on the portfolio during the quarter’s rally and Real Estate positions hampered the portfolio during the September rate-driven decline. The quarter saw two major sector reallocations, as we sold Health Care and bought Industrials at the end of August. The September decline was also bad enough that it caused our cash allocation to signal a move to 100% – this move into cash occurred in early October. This is a rare occurrence but highlights the severity of the bear market. DWEQ continues to lag for the year as we also try to make up for a rough first quarter that saw many shifts in leadership. Momentum strategies tend to lag during these periods as previous leadership makes way for new leadership. Once new trends reassert themselves momentum tends to recover and make up for losses incurred in the transition period.
|Ticker||Security Description||Portfolio Weight %|
|BLACKROCK TREASURY TRUST INSTL 62||10.90%|
|TPL||TEXAS PACIFIC LAND CORP||2.77%|
|LNG||CHENIERE ENERGY INC||2.73%|
|OXY||OCCIDENTAL PETROLEUM CORP||2.49%|
|BAH||BOOZ ALLEN HAMILTON HOLDINGS||2.39%|
|DTM||DT MIDSTREAM INC||2.38%|
As of 09.30.2022.
John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright Alpha Equal Weight ETF (DWEQ) Portfolio Strategist
Past Manager Commentary