Sector Allocation Using Technical Analysis—Alert for the UnderlovedAdvice to the Advisor
Dorsey Wright & Associates, now owned by NASDAQ, is an independent registered investment advisory firm based in Richmond, Virginia. The DWA point-and-figure charting service is just one of many value-added research tools used by Sheaff Brock investment management to enhance investment management for client portfolios.
As value investors, Sheaff Brock investment managers are always on the alert for “underloved” sectors which, while having been temporarily out of favor, are coming back into notice. The Sheaff Brock Dividend Growth and Income Portfolio, primarily built around fundamentals, is based on the principle of “defense is the best offense.” Stock dividends indicate healthy overall corporate governance, while offering downside protection if the value of the stock declines. To add an extra layer of value for both Dividend Growth and Income and ETF selection, Managing Director Dave Gilreath explained to our Institutional editor, Sheaff Brock uses Dorsey Wright research on a sector level.
A simplified overview advisors can use with their clients is that technical analysis is a method of evaluating securities by analyzing statistical data such as prices and volume of trading, while fundamental analysts study the overall economy, industry conditions, and management practices of individual companies. As investopedia.com explains, technical analysts “could not care less” about earnings, expenses, assets and liabilities of any particular company. As technical analysts, Dorsey Wright has provided research results for more than 25 years, focusing on a “Point & Figure” methodology that’s been around for more than 100 years. Relative Strength analyzes the performance of more than 25,000 global stocks and 1,400 ETFs, comparing the magnitude of gains and losses in different securities, measuring the speed of price movements.
By adding the Dorsey Wright technical analysis to its basically fundamental analysis approach to stock selection, Sheaff Brock is able to offer an enhanced perspective to its portfolio design. Employing the technical along with the fundamental, Sheaff Brock uses a double-barrel approach in the search for securities, now “underloved,” but which are judged, in their opinion, to have the greatest potential to come into near-future favor.