Momentum stocks have staggered recently and the Dow Jones Industrial Average has pulled back a bit from all-time highs, triggering the latest concerns that U.S. stocks are overvalued. But don’t worry, this too shall pass, says noted technical analyst Tom Dorsey.
“We’re still in a structural bull market,” said Tom Dorsey, co-founder and president of Dorsey, Wright & Associates.
The firm manages the Global Technical Leaders portfolio, which recently celebrated its one-year anniversary on Covestor.
Dow Jones Industrial Average
Late last year, Dorsey said he thought U.S. stocks would stay strong in 2014.
“Of course there will be pullbacks, but we believe we remain in a bull market,” Dorsey said. “Long-term investors should try to keep their eye on the ball. It might be a good idea to ignore the panic in the financial media because it can lead to bad decisions.”
Dorsey specializes in technical analysis using point and figure charting, and relative strength.
The Global Technical Leaders portfolio is designed to invest in ETFs tracking various equity markets that are showing relative strength. The underlying ETFs are themselves based on indices developed by Dorsey, Wright & Associates.
For example, the portfolio’s largest holding is PowerShares DWA SmallCap Momentum Portfolio (DWAS) at about 49%. The ETF tracks the Dorsey Wright SmallCap Technical Leaders Index.
“Small-caps took the brunt of the pain during the first quarter and the Global Technical Leaders portfolio underperformed the S&P 500,” Dorsey said. “That will happen since we expect the model will underperform one quarter out of every four. So we think this might be a very good time to get in. We think we’ll come back strong and that 2014 will be a great year.”
Dorsey also touted the portfolio’s low 0.25% fees.
The portfolio also owns PowerShares DWA Momentum Portfolio (PDP), PowerShares DWA Emerging Markets Momentum Portfolio (PIE) and PowerShares DWA Emerging Markets Momentum Portfolio (PIZ).
“The portfolio periodically rebalances and historically has had very little turnover,” Dorsey noted. “It gives investors the ability to invest in markets around the globe, including developed and emerging markets.”
Dorsey, Wright & Associates was founded in 1987 and offers a variety of financial research and money management services. The firm employs a rules-based approach rooted in relative strength, which is designed to remove the emotions and biases from the equation.
Photo credit: Antonio Morales Garcia via Flickr Creative Commons
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