DWMC: 4th Quarter 2020 Portfolio Manager 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/dwmc.

Strategy

The AdvisorShares Dorsey Wright Micro-Cap ETF (DWMC) uses relative strength to allocate towards areas of strength in the micro-cap market. The portfolio is systematically managed and reviewed on a daily basis using the Dorsey Wright relative strength ranks. The strategy starts with the smallest 2,000 companies that trade on a US exchange; the securities are then screened for size and liquidity. The companies are each given a relative strength score and the portfolio allocates to approximately 150 – 200 companies that are in the top quartile of the rankings. Securities included are roughly equal- weighted based on the available cash at the time of purchase. This universe and the portfolio are ranked and evaluated for changes on a daily basis. Once a company’s rank fall below a preset threshold, it is removed from the portfolio and the portfolio reallocates to higher relative strength names.

Performance

2020 will be a year that is burned in our collective consciousness as one of trials and triumphs. In 2020 we saw a record decline in the global markets that ended the longest U.S. bull market in history as Covid began to devastate the globe. We also saw one of the sharpest rebounds off of the bottom in history, and by the end of the year we had made several new highs in U.S. Equity markets. While not all markets responded in such a resound way, equities as a whole had a strong year.

The smallest companies in the market were benefactors in this rally, as Microcap stocks outpaced Large Cap equities for the first time in recent history. The strategy was able to capitalize on this positive trend and thanks to strong stock selection was able to outpace the broad Microcap market. This largely came ​from the second half of the year after markets continued to recover from the lows of the March sell off.  

Holdings

Top 10 Holdings

Ticker Security Description Portfolio Weight %
CELH CELSIUS HOLDINGS INC 3.35%
APPS DIGITAL TURBINE INC 3.32%
BEEM BEAM GLOBAL 2.35%
FIVN FIVE9 INC 2.11%
KNSL KINSALE CAPITAL GROUP INC 1.62%
AMRC AMERESCO INC-CL A 1.43%
XPEL XPEL INC 1.32%
TWST TWIST BIOSCIENCE CORP 1.29%
OCUL OCULAR THERAPEUTIX INC 1.17%
KRNT KORNIT DIGITAL LTD 1.17%

As of 12.31.2020. Cash is not included.

Sector

The strategy is positioned to overweight or underweight sector allocations dependent on the relative strength of the investable universe and the portfolio allocation. The sector weight is entirely determined by the strength of the individual names in the portfolio and those that are selected based on the strategies technical buy process.

Over the course of the year we saw several shifts in the constituents, with the portfolio removing over 300 names as momentum in the markets shifted to favor more technology and Healthcare companies. This shift is reflected not only in the removals of the lagging names, but the continued strength and growth of the strong securities. Overall Industrials, Technology and Healthcare dominated the portfolio from an allocation and return perspective early in the year and continued to maintain that leadership through the melt up. Overall we believe the portfolio is well positioned to respond to the changes and events that 2021 has to offer.

As of 12.31.2020.

Allocation Changes

As of 12.31.2020.

Respectfully,

John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright Micro Cap ETF (DWMC) Portfolio Manager

 

 


Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

The Fund is subject to a number of risks that may affect the value of its shares, including the possible loss of principal. Stock prices of microcap companies are significantly more volatile, and more vulnerable to adverse business and economic developments, than those of larger companies. Micro-cap stocks may also be thinly traded, making it difficult for the Fund to buy and sell them. There is no guarantee that the Fund will achieve its investment objective.

Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.

Holdings and allocations are subject to risks and to change.

The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.