DWMC: July 2019 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/fund/dwmc
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.
July was favorable for equity markets as the positive trend has continued to push equities to new highs. The portfolio posted a positive return again for the month, bringing the Year to Date (NAV) return to 24.0% and helping to widen the spread between the portfolio and the Russell Microcap Index (12.6%). While the performance was positive, returns on a sector and holding level were mixed as the market dispersion continues to favor some and punish others.
The portfolio is currently comprised of 152 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 15.3% of the overall portfolio.
|Ticker||Security Description||Portfolio Weight %|
|CWST||CASELLA WASTE SYSTEMS INC-A||1.92%|
|ENPH||ENPHASE ENERGY INC||1.79%|
|ERI||ELDORADO RESORTS INC||1.78%|
|IIPR||INNOVATIVE INDUSTRIAL PROPER||1.43%|
|AXSM||AXSOME THERAPEUTICS INC||1.15%|
|APPF||APPFOLIO INC – A||1.12%|
As of 07.31.2019. Excludes cash positions.
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 23% of the portfolio, followed by two smaller by meaningful positions in Technology at 19.1% and Industrials 20%. 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 a small 1% allocation, tends to be dominated by mid and large cap companies.
Last month we saw Technology drive the majority of the portfolios positive return, this was largely due to a broad rally across our Technology holdings rather than a few “superstars”. Industrials, Healthcare and Consumer Cyclicals posted meaningful returns as well, with the remaining sectors posting flat or negative contributions for the month.
As of 07.31.2019.
As the markets reconstituted and found new leader after a difficult fourth quarter, the portfolio made a large number of changes since the start of the year. The portfolio saw a large number of changes in July as the US equity markets continue to find even footing in the turbulent equity markets. The majority of the changes this month centered in the largest sector, Healthcare. These changes reduced the net number of holdings in the sector, however it did not reduce the overall allocation in the portfolio. Overall the portfolio’s allocation stayed fairly static in the face of a continued broad trend.
As of 07.31.2019.
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.