DWMC: 1st 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.
DWMC ended Q1 down -6.57% which allowed it to beat the Russell Microcap index by 1.03%. This continues a good string of performance for DWMC as it outperformed the benchmark by 16.25% in 2021. Although the portfolio was down for the quarter, this was during a period where we saw the most stress in equity markets since early 2020. Allocations to previously leading sectors like Technology and Consumer Discretionary hurt the portfolio the most as those sectors saw the largest corrections during the quarter. Allocations to commodity-driven sectors such as Energy and Materials helped to counterbalance those declines though and set the stage for the outperformance as our dynamic approach can overweight those sectors to a larger degree than you would see in a passive benchmark.
The portfolio is currently comprised of 166 companies that range in market cap from $31 million to $3,155 million. Traditionally, micro-cap companies are below $300 million 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 14.75% of the overall portfolio.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|AMR||ALPHA METALLURGICAL RESOURCE||2.73%|
|SPLP||STEEL PARTNERS HOLDINGS LP||1.51%|
|UAN||CVR PARTNERS LP||1.45%|
|SD||SANDRIDGE ENERGY INC||1.43%|
|CLMT||CALUMET SPECIALTY PRODUCTS||1.14%|
|GDEN||GOLDEN ENTERTAINMENT INC||1.11%|
|RYI||RYERSON HOLDING CORP||0.97%|
As of 03.31.2022. 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 Industrials, Energy, and Materials as the commodities boom in Q1 helped increase their relative strength. Significant underweights include Health Care and Technology. Most buying this quarter was centered on Financials (who should be helped by higher interest rates) and Energy while selling tended to be more diverse.
As of 03.31.2022.
John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright Micro Cap ETF (DWMC) Portfolio Manager
Past Manager Commentary