DWMC: 3rd 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.
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.
The third quarter continued the trend of the first half 2020, with increased volatility and continued uncertainty among investors. Overall the portfolio did well over the quarter even in the face of a decline in September, thanks to a strong performance at the start of the quarter. Across the portfolio we saw broad support this quarter, with a majority of sectors providing positive 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 18.13% of the overall portfolio
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|APPS||DIGITAL TURBINE INC||2.55%|
|CWST||CASELLA WASTE SYSTEMS INC-A||2.29%|
|KNSL||KINSALE CAPITAL GROUP INC||2.04%|
|CELH||CELSIUS HOLDINGS INC||2.00%|
|APPF||APPFOLIO INC – A||1.65%|
|CRDF||CARDIFF ONCOLOGY INC||1.47%|
|AMRC||AMERESCO INC-CL A||1.22%|
As of 9.30.2020. 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. Industrials which saw additions over the last few months was a major driver in the portfolio this quarter along with Technology and Consumer Discretionary which was the largest contributor to the portfolio over the quarter. Over the quarter we saw a large number of changes occur as new trends emerged and prior strength slowed.
As of 9.30.2020.
Over the course of the year 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. Technology was the largest single change this month, as it dropped over 1.5%. The largest single sector gain was in Consumer Discretionary which saw strong performance across the sector and was able to increase the overall number of holdings as the portfolio made changes.
As of 9.30.2020.