In 2017 the ETF has added a notable $50 million in new assets via creation flows, although it has been on a bit of a losing streak in the past several sessions since trading at a new 52-week high last week.
ETF portfolio managers and ETF investors alike are most likely acclimated with Dorsey Wright when it comes to the concept of “Technical Analysis” and how it corresponds with ETF trading and investing, and this specific product was launched a little over a year ago in March of 2016.
Fund literature spells out that the underlying index “The Dorsey Wright Dynamic Focus Five Index is designed to provide targeted exposure to five First Trust sector and industry based ETFs and the Nasdaq U.S. T-Bill Index.” Furthermore, and this will resonate with those that are familiar with Dorsey Wright, “The index combines Dorsey, Wright & Associates’ (DWA) systematic momentum approach to sector rotation and risk management via cash equivalents represented by 1- to 3-month U.S. Treasury bills in the cash index.”
The “Focus 5” aspect in the title of the fund refers to five specific First Trust sector and industry ETFs that may be used in the portfolio at any time, and the determination of such comes from DWA’s “proprietary relative strength methodology.” This relative strength analysis is said to be “conducted twice monthly” with ETFs being “replaced when they fall sufficiently out of favor, based on their relative strength, versus the other ETFs within the universe.”
While we are pitted firmly in corporate earnings season now as we have repeatedly documented in this daily piece, a fund such as FVC may be potentially very useful in monitoring how various sectors are reacting to earnings hits and misses around the markets and how these industries are trading relative to one another since they are constantly in motion.
Presently we see the top holdings as follows: 1) FDN (First Trust Dow Jones Internet, Expense Ratio 0.54%), 2) QTEC (First Trust NASDAQ-100 Technology Sector, Expense Ratio 0.60%), 3) FXR (First Trust Industrials/Producer Durables AlphaDEX, Expense Ratio 0.66%), 4) First Trust Nasdaq Bank, Expense Ratio 0.60%), and 5) FXU (First Trust Utilities AlphaDex, Expense Ratio 0.62%).
Of course, being a rules-based strategy it is helpful to look at these holdings a couple times per month to see if there have been any relative strength changes in the marketplace that warrant a reshuffling of the portfolio and perhaps this will lend clues to which names/sectors will be shorter and longer term leaders and laggards.
The First Trust Dorsey Wright Dynamic Focus 5 ETF (NASDAQ:FVC) was trading at $23.56 per share on Monday afternoon, down $0.02 (-0.08%). Year-to-date, FVC has gained 9.26%, versus a 11.51% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.