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Not all sector exposure is created equal. In fact, there can be significant differences in holdings and performance between a momentum-weighted and capitalization-weighted sector ETF. Consider the table below which shows the top 5 holdings of our PowerShares DWA Momentum Sector ETFs shaded in green and the weights of those same positions in a capitalization-weighted ETF, shaded in blue. (click to enlarge) Source: Powershares and State State Street Advisors, 10/19/15 What accounts for the differences in holdings? A stock can have large capitalization, but weak momentum. The investment universe for the PowerShares Momentum ETFs includes Small, Mid, and Large Cap stocks. Also, keep in mind that the number of stocks in each momentum sector ETF can range from approximately 30-75. When small caps have better relative strength we will tend to have more holdings and when large caps are in favor we will tend to have fewer holdings. See the table below for the current number of stocks in each sector momentum index as well as their current market value. Source: PowerShares, as of 10/19/15 YTD performance of our momentum sector ETFs vs. their capitalization-weighted peers is shown below: As of 10/19/15. The performance above is based on pure price returns, not inclusive of dividends or all transaction costs. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. So far in 2015, 6 of our 9 momentum sector ETFs is outperforming their capitalization-weighted peers. The relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value. See www.powershares.com for a prospectus. Dorsey Wright is the index provider for a suite of momentum ETFs with PowerShares. Scalper1 News
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