PDP tracks the Dorsey Wright Technical Leaders Index, “which takes into account, among other factors, the performance of each of the approximately 1,000 largest companies in the eligible universe as compared to a benchmark index, and the relative performance of industry sectors and sub-sectors,” according to PowerShares.
With the possible exception of Apple (NasdaqGS: AAPL), few if any of PDP’s top-10 holdings have the look of true momentum stocks. Again, the ETF holds no Internet and social media stocks. To be fair, PDP does hold some true momentum names, such as Netflix (NasdaqGS: NFLX) and Tesla (NasdaqGS: TSLA), but the ETF’s weights to those names are light.
What PDP does feature is a combined weight of nearly 48% to the consumer discretionary and industrial sectors, two laggard groups this year. Yet PDP is up almost 9% this year while cap-weighted discretionary ETFs are still trying to get to year-to-date gains of 3%. Traditional ETFs are clinging to gains in the 4% to 5% range.
PDP’s 15.7% allocation to the materials sector has been a boon for the ETF as five of the ETF’s six largest materials holdings have traded higher this year and four of those five names have posted gains north of 10%. [An ETF Trade for the Summer Blues]
Powershares DWA Momentum Portfolio
Tom Lydon’s clients own shares of Apple.