October 2018 Portfolio Manager Review
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 2000 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 falls below a preset threshold, it is removed from the portfolio and the portfolio reallocates to higher relative strength names.
The portfolio is currently comprised of 163 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 14.2% of the overall portfolio.
Top 10 Holdings
|Ticker||Security Description||Portfolio Weight %|
|ERI||ELDORADO RESORTS INC||1.53%|
|CWST||CASELLA WASTE SYSTEMS INC-A||1.53%|
|LOXO||LOXO ONCOLOGY INC||1.45%|
|VKTX||VIKING THERAPEUTICS INC||1.32%|
|TRHC||TABULA RASA HEALTHCARE INC||1.28%|
|STAA||STAAR SURGICAL CO||1.21%|
As of 10/31/2018
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. Currently, DWMC continues to have a large sector allocation to Healthcare at 29% of the portfolio, followed by two smaller but meaningful positions in Industrials at 15.9% and Consumer Cyclicals at 13.6%. Healthcare, in the current market, has continued to show strength and often comprises a large portion of the micro-cap universe, while Utilities, which has no allocation, tends to be dominated by mid and large cap companies.
Changes from Prior Month
The allocations remained fairly static this month, with the portfolio adjusting along with the market. The largest change this month was a 1% increase in Energy and a 1% percent decrease in Financials. The remaining sectors remained relatively close to last month's allocations.
AdvisorShares Dorsey Wright Micro Cap ETF (DWMC) Portfolio Manager