PTH - PTH: Avoid This Momentum-Based Small-Cap Health Care ETF
2024-03-13 04:10:26 ET
Summary
- PTH tracks the DWA Healthcare Technical Leaders Index, selecting U.S. Health Care stocks based on a proprietary relative strength measure.
- There are about 300 U.S. Health Care stocks in the selection universe. The Index only requires 30, and any point, you'll see many early-stage firms delivering exceptional short-term returns.
- As a result, PTH holds mostly small-cap stocks with huge recent price gains. However, the flaw is its passively-managed approach that rebalances and reconstitutes on a fixed quarterly timeline.
- Active management is more appropriate for this segment of the market. These managers could engage in regular profit-taking rather than being forced to hold after an abnormally high gain.
- This flawed strategy and the speculative nature of PTH lead me to assign a "sell" rating.