DWMC: 1st Quarter 2022 Portfolio 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

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.

Holdings

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%
DAC DANAOS CORP 1.97%
SPLP STEEL PARTNERS HOLDINGS LP 1.51%
VRTV VERITIV CORP 1.49%
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%
CAMT CAMTEK LTD 0.96%

As of 03.31.2022. 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.

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.

Respectfully,

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

 

Past Manager Commentary


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.