DWMC: 2nd Quarter 2022 Portfolio Review
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.
US Equities (as measured by the S&P 500 Index) had a terrible quarter (the 8th worst since 1956), and Microcaps were not spared. The Russell Microcap Index was down -18.96%, but DWMC was able to outperform by a bit (-17.54%). This leaves it up 1.8% over the index YTD (-23.3% vs. -25.1%) and over 10% ahead of the index over the previous year. From a sector perspective, Consumer Staples, Information Technology, and Communication Services were the top contributors for the portfolio while Industrials, Financials, and Consumer Discretionary were the biggest detractors. The best performing stock was RCM Technologies which was up +105.27% (adding 0.60% return) while the worst performing stock was Danaos Corp which was down -37.93% (subtracting 0.70% return). The portfolio is currently overweighted towards Energy, Industrials, Financials, and Materials. These more value-oriented sectors have led the way in 2022 and should their trends remain intact we feel confident the portfolio will continue to outperform.
The portfolio is currently comprised of 160 companies that range in market cap from 88mm to 2,416mm. 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, mid, or large 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 ~16% of the overall portfolio.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|AMR||ALPHA METALLURGICAL RESOURCE||3.23%|
|SPLP||STEEL PARTNERS HOLDINGS LP||1.84%|
|SD||SANDRIDGE ENERGY INC||1.70%|
|RCMT||RCM TECHNOLOGIES INC||1.52%|
|PBT||PERMIAN BASIN ROYALTY TRUST||1.40%|
|UAN||CVR PARTNERS LP||1.27%|
|HDSN||HUDSON TECHNOLOGIES INC||1.15%|
|CLMT||CALUMET SPECIALTY PRODUCTS||1.05%|
As of 06.30.2022. 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.
The portfolio is currently most overweighted towards Energy, Industrials, and Financials as value-oriented sectors continue to outperform. Significant underweights include Health Care and Technology.
As of 06.30.2022.
John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright Micro Cap ETF (DWMC) Portfolio Manager
Past Manager Commentary