Consumer discretionary, one of the sectors trading at the largest valuation premium to the S&P 500, is now PDP’s largest sector weight at 28.5%, up from about 20% at the start of last year.
Historical data indicate the time is right to consider PDP in concert with the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV).
Dorsey Wright & Associates back-tested the S&P 500 Low Volatility Index, SPLV’s index, for the 1997 through 2011 time frame, noting that it returned almost 87% in the November 1-April 30 period, also known as the best six months for stocks.
On the other hand, PDP’s underlying index, the Dorsey Wright Technical Leaders Index jumped a staggering 465.5% in the best six-period from 1997 through 2011, according to Dorsey Wright data.
A portfolio of 70% to PDP and 30% to SPLV over that period more than quadrupled in the November through April time frame of those years. [A Compelling Two-ETF Strategy]
PDP Consumer Discretionary Weight
Chart Courtesy: Dorsey Wright, Seeking Alpha