DWSH: 1st Quarter 2022 Portfolio Review
The AdvisorShares Dorsey Wright Short ETF (Ticker: 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 can be used 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 the strategy as an alpha bet during period of market distress. During period of high dispersion among securities, there are typically 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.
DWSH fell -1.5% in Q1 2022 with the S&P 500 down -4.6%. Obviously we would hope for the portfolio to provide a positive return when the market falls, but the quarter saw many powerful moves in both directions making it hard for the portfolio to capture the strongest downtrends.
Currently the portfolio is comprised of 100 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 quarter we saw over 50% of the portfolio turnover as trends continued to change in the markets and previously out of favor areas roared back into focus.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|SNAP||SNAP INC – A||-1.21%|
|FSLR||FIRST SOLAR INC||-1.16%|
|PARA||PARAMOUNT GLOBAL-CLASS B||-1.13%|
As of 03.31.2022
The portfolio has seen many allocation changes this quarter corresponding with the changes in sector leadership we’ve seen. In particular, the portfolio currently holds no allocation to Energy, Utilities, or Consumer Staples which have all performed very well this year. The portfolio has also increased its weighting to traditionally strong segments of the market including Information Technology and Consumer Discretionary as these companies have suffered the most in the new regime.
As of 03.31.2022.