DWSH: 3rd 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 had a great quarter as it gained +6.32% while the S&P 500 Index dropped -4.88%. The extra performance was mostly helped by shorts in Financials and Consumer Discretionary stocks. This puts YTD performance at +30.71% vs. -23.87% for the S&P 500. This is exactly what we hope to see during a bear market as the portfolio has been able to short the weakest areas of the market with a higher weighting than the corresponding long exposure in the S&P 500.
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 32% of the portfolio turnover as volatility soared in the back half of the quarter, negating trends established in the first half.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|BLUE||BLUEBIRD BIO INC||-1.67%|
|SNAP||SNAP INC – A||-1.14%|
|WYNN||WYNN RESORTS LTD||-1.06%|
|WDAY||WORKDAY INC-CLASS A||-1.06%|
As of 09.30.2022
The portfolio saw relatively fewer allocation changes this quarter vs. Q2 as the current market laggards continued to underperform. The portfolio saw increases short exposure towards Real Estate, Materials, and Financials while decreasing exposure to Industrials and Information Technology.
As of 09.30.2022.
John G. Lewis
Nasdaq Dorsey Wright
AdvisorShares Dorsey Wright Short ETF (DWSH) Portfolio Manager
Past Manager Commentary