Momentum-Weighted Sector Indexing

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Includes: PEZ, PFI, PRN, PSL, PTF, PTH, PUI, PXI, PYZ
by: Dorsey Wright Money Management

Editor's note: Originally published on July 8, 2014

While most sector ETFs are capitalization-weighted, the PowerShares DWA Momentum Sectors are, as the name suggests, weighted by momentum. The nine momentum sectors are shown below:

To highlight the attributes of one of these momentum sector ETFs, The PowerShares DWA Consumer Cyclicals Momentum ETF (NASDAQ:PEZ), consider the following:

  1. PEZ has 40 holdings while many cap-weighted Consumer Cyclical sector ETFs have 2-4 times that many holdings. The number of holdings in each of our momentum sector ETFs can range from approximately 30-75.
  2. The average technical attributes of the stocks currently in PEZ is 4.70. (Dorsey Wright's research database assigns all stocks a technical attribute rating of 0-5, 5 being the strongest and 0 being the weakest)
  3. PEZ has exposure to large, mid, and small cap Consumer Cyclical stocks, while, by definition, capitalization-weighted sector ETFs focus on large caps. PEZ's capitalization exposure is shown below:

pez cap1 Momentum Weighted Sector Indexing

4. Those investors interested in a sector rotation model using these momentum sector ETFs can click here.

Disclosure: Dorsey Wright is the index provider for the suite of PowerShares DWA Momentum ETFs. See www.powershares.com for more information.