DWMC: 3rd 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

Microcaps were roughly flat for the quarter, while DWMC lagged with a -4.52% return. This leaves the ETF trailing the Russell Microcap Index benchmark by a little over 1% YTD (-26.76% vs. -25.48%). From a sector perspective, Energy and Information Technology were the top contributors while Financials and Healthcare were the biggest detractors. The best performing stock was Bel Fuse Inc. which was up +62.94% (adding 0.32% return) while the worst performing stock was Trevi Therapeutics which was down -57.42% (subtracting 0.28% return). The portfolio is currently overweighted towards Financials, Energy and Industrials. The portfolio saw net increase toward Financials (+2.6%), Energy (+2.2%), and Healthcare (+2.1%) over the quarter with decreases in Information Technology (-1.04%) and Real Estate (-1.2%).

Holdings

The portfolio is currently comprised of 168 companies that range in market cap from 98mm to 2,370mm. 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 ~14.6% of the overall portfolio.

​​Top 10 Holdings

Ticker Security Description Portfolio Weight %
AMR ALPHA METALLURGICAL RESOURCE 3.59%
SPLP STEEL PARTNERS HOLDINGS LP 1.91%
PBT PERMIAN BASIN ROYALTY TRUST 1.44%
VRTV VERITIV CORP 1.39%
HDSN HUDSON TECHNOLOGIES INC 1.18%
SJT SAN JUAN BASIN ROYALTY TR 1.13%
DFIN DONNELLEY FINANCIAL SOLUTION 1.10%
TRNS TRANSCAT INC 0.97%
BELFB BEL FUSE INC-CL B 0.94%
RELL RICHARDSON ELEC LTD 0.94%

As of 09.30.2022. 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 Energy, Industrials, and Financials as value-oriented sectors continue to outperform.  Significant underweights include Health Care and Technology.

As of 09.30.2022.

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.