DWMC: July 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.
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.
Equity markets in the US continued a positive streak this month after a rough patch caused by the COVID slow down. Microcaps continued to rebound at a slower rate than Large Cap companies this month, however, the area continued to be positive. The portfolios Technology and Consumer Cyclical exposure was the driving force behind this month’s return, while Healthcare was an unexpected anchor to the performance
The portfolio is currently comprised of 154 companies that range in market cap from 135mm to 5,100mm. Traditionally, micro-cap companies are below 300mm in total market capitalization. Once a security is included in the portfolio, we will not sell it unless it falls significantly out of favor in our ranks. This means that at times, we may own companies that are more traditionally defined as small or mid cap stocks. This allows the portfolio to fully capitalize on securities that are exhibiting strong momentum characteristics. Currently, our top 10 holdings are comprised of companies that have appreciated to a larger allocation over time in the portfolio; the top 10 holdings comprise 17.43% of the overall portfolio.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|CWST||CASELLA WASTE SYSTEMS INC-A||2.36%|
|KNSL||KINSALE CAPITAL GROUP INC||2.20%|
|EVER||EVERQUOTE INC – CLASS A||1.98%|
|APPF||APPFOLIO INC – A||1.63%|
|CELH||CELSIUS HOLDINGS INC||1.31%|
|GSHD||GOOSEHEAD INSURANCE INC -A||1.29%|
As of 7.31.2020. Cash is not included.
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 past month we have seen major shifts in the portfolio cause by both trades and market movement. Technology moved into the number one position this month followed by Healthcare which held the top spot last month. This change was the largest in the portfolio this month and was not surprising given the drop in Micro Cap companies last month.
As of 7.31.2020.
Over the past quarter we have continued to see markets adapt to new leadership and shed the performance that drove the markets at the start of the year. This capitulation has continued to show in the portfolio as our process continues to adapt to changes in the markets. Over the past quarter we have continued to see the markets process the changes caused by Covid-19 and the ensuing shifts caused by the economic slowdown. Healthcare was the largest single change this month, as it dropped over 8% and moved into the second largest sector allocation. A large portion of the drop was gained in Consumer Cyclicals which gained over 4% this month, as well as Industrials and Financials.
As of 7.31.2020.