Invesco Exchange-Traded Fund Trust II Invesco Dorsey Wright SmallCap Momentum ETF (DWAS) seeks to track the Dorsey Wright SmallCap Technical Leaders Index, which measures the performance of small-cap U.S. stocks exhibiting the strongest relative price momentum. This momentum-based strategy focuses on small-cap companies showing superior technical price performance compared to their peers.
How It Works
DWAS uses a rules-based momentum methodology that ranks small-cap stocks by their relative strength scores, calculated using point-and-figure charting techniques developed by Dorsey Wright. The fund selects approximately 200 small-cap stocks showing the strongest momentum signals and weights them equally. Holdings are rebalanced quarterly to capture new momentum leaders while eliminating stocks that have lost their technical momentum. This active momentum rotation strategy systematically buys recent winners and sells recent losers.
Key Features
- Uses proprietary Dorsey Wright point-and-figure charting methodology to identify momentum rather than traditional price-based calculations
- Equal-weighting approach prevents large positions from dominating performance, unlike market-cap weighted small-cap ETFs
- Quarterly rebalancing captures evolving momentum trends while avoiding excessive turnover costs from monthly changes
Risks
- This ETF can lose significant value when momentum strategies reverse, as winning stocks often become losers quickly during market rotations or corrections
- Small-cap momentum stocks exhibit extreme volatility and could decline 50-60% during bear markets due to their speculative nature and momentum reversals
- Strategy performs poorly during sideways markets when no clear momentum trends exist, potentially underperforming broad small-cap indexes for extended periods
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for aggressive investors with high risk tolerance and 1-3 year tactical time horizons. Requires active monitoring due to momentum strategy volatility. Ideal for investors seeking to capitalize on small-cap momentum trends or diversify beyond traditional value and growth factors.