DWSH: June 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/dwsh.
The AdvisorShares Dorsey Wright Short ETF (DWSH) is built on the relative strength testing that Dorsey Wright has been doing for over almost two decades. Rather than investing in those companies that are exhibiting the strongest relative strength however, we identify the bottom tier or laggards and short them. Shorting using relative strength is by no means a new idea, when reading academic literature on momentum from the past 40 years, the idea of buying the past winners and shorting the losers is often found to be a sensible allocation.
Our vision for utilizing the strategy is twofold. First, is using DWSH as a hedge against downside US equity volatility, helping to reduce the volatility of the portfolio by pairing DWSH with a traditional long portfolio. The second is using DWSH as an alpha bet during period of market distress. During period of high dispersion among securities, there are well-defined winners and losers. Rather than buying a broad short of the whole market, we systematically invest in companies that are identified to be weak and have a greater chance in our opinion of dropping more than the other companies drop in the universe.
2020 has continued to be a record year. So far this year we have seen unemployment across the globe rise to record levels (the U.S. unemployment rivals the great depression), equity markets sold off at a record speed which pushed the US market into a bear market and oil moved into negative territory as demand has deteriorated. Since the depths of the market sell off at the end of March, the equity market just as quickly pulled itself out of a bear market, also in record time. June was a continuation of this trend as the S&P 500 posted a +2% return and the Nasdaq 100 reached new highs. The strategy saw a noticeable decline this month as relative strength laggards posted strong gains for the first time since the sell off. As we continue to see trends evolve, the strategy is designed to adjust the holding systematically to take advantage of new trends.
Currently the portfolio is comprised of 103 companies spread across the major macro sectors. This number will fluctuate over time as positions grow to a larger allocation of the portfolio and as securities are replaced in our sell process. As securities are removed from the portfolio, the new purchases will be allocated at roughly equal weight, depending on the cash level. Over the past several months we have seen several names continue to grow in our holdings as the markets continue to hold the companies in an unfavorable light.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|MIK||MICHAELS COS INC/THE||-1.72%|
|VIAC||VIACOMCBS INC – CLASS B||-1.50%|
|SGMS||SCIENTIFIC GAMES CORP||-1.36%|
|CLB||CORE LABORATORIES N.V.||-1.33%|
|UAL||UNITED AIRLINES HOLDINGS INC||-1.30%|
|PTEN||PATTERSON-UTI ENERGY INC||-1.29%|
|PE||PARSLEY ENERGY INC-CLASS A||-1.28%|
|GT||GOODYEAR TIRE & RUBBER CO||-1.25%|
As of 6.30.2020
The portfolio is continually reevaluated so that it is well positioned to capture current market trends. In the current markets we have seen the portfolio continually make changes along with the changes in sentiment in the market. The portfolio saw a large number of shifts over the past month, with major changes happening in Consumer Cyclicals and Industrials. As the markets continue to digest new information around Covid-19 and the recession that it has caused, the portfolio will continue to position itself appropriately.
As of 6.30.2020.