PowerShares and Dorsey Wright have launched their fourth
exchange traded fund that uses a relative-strength strategy.
PowerShares DWA SmallCap Technical Leaders Portfolio (
) picks 200 stocks from a universe of the 2,000 smallest U.S.
companies in a broader set of 3,000 of the largest U.S. listed
stocks. Dorsey uses a proprietary method to rank stocks based on
Relative strength measures how a stock performed vs. the
market over a given period of time. The ETF, which started
trading July 19, rebalances and reconstitutes quarterly.
"We believe this index construction process is robust in its
ability to identify stable leadership trends, and adaptive in its
ability to rotate as market trends themselves change," Dorsey
Wright said in a blog.
The ETF currently is most heavily weighted in health care at
22% of assets, financials 19%, information technology 16%,
consumer discretionary 15%, industrials 15%, materials 7%,
consumer staples 5% and energy 2%.
The largest holdings includeJazz Pharmaceuticals (
),Pier 1 Imports (
), Clean Harbors (
),Dollar Thrifty Automotive Group (
) andExact Sciences (EXAS). Each is weighted between 1.5% and
1.7% of assets owing to the ETF's modified cap-weighting method.
They range from $585 million to $3.1 billion in market value.
DWAS charges a 0.60% annual management fee.
Performance in Dorsey Wright's three other ETFs that use the
same strategy vary. Over the five years since they launched, they
have gathered $750 million in assets under management.
PowerShares DWA Technical Leaders (PDP) returned 11.22% year
to date going into Monday vs. 9.65% for the S&P 500,
according to Morningstar Inc. It's up a scant 0.11% over the past
12 months, while the S&P 500 is up 5.09%. PDP returned 20.80%
and -0.16% annualized over the past three and five years
respectively. The S&P climbed 15.11% and -0.17% over the same
periods. It holds 100 stocks selected from a universe of 3,000 of
the largest listed in the U.S.
PowerShares DWA Emerging Markets Technical Leaders Portfolio
(PIE) gained 4.92% year to date, close to the 3.92% return on
average for diversified emerging markets ETFs tracked by
Morningstar. It lost 12.43% in the past year while emerging
markets fell 15.25%. PIE returned 12.66% annualized the past
three years vs. 5.43% for its peer group. It holds 100
PowerShares DWA Developed Markets Technical Leaders Portfolio
(PIZ) added 2.48% year to date vs. 1.96% for the MSCI EAFE index.
It lost 17.96% in the past 12 months vs. the benchmark's 13.07%
loss. PIZ rose 6.84% annualized the past three years vs. 4.62%
for the MSCI EAFE. It also holds 100 stocks.