Managers & Models

The Dorsey Wright Systematic Relative Strength Core Model

Unlocking Performance Potential through Relative Strength: At the core of the Dorsey Wright investment philosophy lies an unwavering belief in the power of relative strength—a methodology considered the most robust and adaptable form of security analysis ever developed. Contrary to popular belief that simplicity compromises efficacy, relative strength has consistently proven itself through numerous market cycles. Time and again, both portfolio managers and academic studies have validated its potential as a viable methodology for consistently outperforming the market over the long term.

Investment Strategy: Strategic Overweighting for Superior Outcomes

Systematic Relative Strength Focus: The Systematic Relative Strength accounts are not concerned with timing the market's entries and exits. Instead, the focus is on strategically overweighting in areas poised for strength within the market. This approach ensures that portfolios are dynamically positioned to capitalize on opportunities.

Portfolio Construction: A Four-Step Rigorous Process

1. Sector Overlay - Guided by Relative Strength: The investment process kicks off with a sector overlay, meticulously crafted based on relative strength. This step determines the optimal weight in each sector and industry group, setting the foundation for a robust and adaptive portfolio.
2. Proprietary Relative Strength Model: A proprietary relative strength model is employed to rank the universe of mid and large cap stocks, ensuring that the selection is grounded in a data-driven approach. This model is the result of thorough research and analysis, identifying stocks with the potential to outperform within their respective sectors.
3. Dynamic Portfolio Adjustment: Regular assessments are conducted to compare current portfolio allocations against model weightings and holdings. This dynamic evaluation allows for identifying necessary changes, ensuring that portfolios remain aligned with evolving market conditions.
4. Selective Stock Picking - Rigorous Criteria: The final step involves selecting 20-to-25 stocks that meet stringent criteria, including sector, industry group, and individual stock relative strength. This rigorous selection process is a key element in constructing portfolios that exhibit strength and resilience.

Outperformance through Adaptability:

The approach transcends market timing, emphasizing strategic positioning to be overweighted in sectors and stocks exhibiting robust relative strength. The Dorsey Wright Systematic Relative Strength Core Model is designed to adapt, identify opportunities, and construct portfolios that have the potential to outperform across various market conditions. In navigating the dynamic landscape of financial markets, Dorsey Wright’s commitment to systematic relative strength positions investors for sustained success.