The proof is in the pudding. It took PTH seven weeks to gain 7.2%, but just seven trading days since the index swap to gain 4.6%. The index change also means PTH now features six biotech stocks combining for over 24% of its weight in its top-10 holdings. At the end of 2013, PTH had just three biotech stocks in its top-10 lineup combining for less than 8% of the ETF’s weight,
Weighting an ETF by momentum or relative strength has its advantages and drawbacks. Both were on full display last year with two PowerShares ETFs. For example, the PowerShares DWA Emerging Markets Momentum Portfolio (NYSEArca: PIE) was severely punished when developing economies were pressured by speculation of tapering by the Federal Reserve.
On the other hand, in what was a good year for U.S. small-caps, the PowerShares DWA SmallCap Momentum Portfolio (NYSEArca: DWAS) crushed the Russell 2000 by over 1,100 basis points. [Momentum ETF Could Rally]
PowerShares DWA Healthcare Momentum Portfolio
