The end of Q3 brings about the quarterly evaluations for our large-cap (PDP) and small-cap (DWAS) momentum strategies. Both saw a handful of trades as leadership trends.

The 3rd quarter of 2025 saw a continuation of a mostly strong equity market as major benchmarks marched to further all-time highs. Large cap momentum strategies still lag YTD, but did do a bit of catchup throughout Q3 as broader leadership trends continued. Small cap momentum strategies advanced, but lagged benchmarks as new leadership emerged to push the group to new highs.

The performance table below compares the price return of the Invesco Dorsey Wright Momentum ETF PDP and the Invesco Dorsey Wright SmallCap Momentum ETF DWAS to their respective benchmarks through the first three quarters, while the two bottom tables compare their YTD return against the same timeframe in prior years.

Our approach toward momentum through relative strength analysis looks to capitalize on consistent trends across the market. Changing trends cause the portfolios to readjust to maintain exposure to the strongest areas. Underperformance is typical during those environments as areas that had demonstrated relative strength fall in our rankings. The most important step in our approach comes next – those areas that have declined in strength are sold to make room for the new leaders. Any investment process is going to produce a portfolio of winners and losers. Relative strength analysis gives us a systematic way to cull the losers and constantly push the portfolio toward the strongest areas of the market.  

In the most recent quarter (Q3) we saw 45 changes (out of 100 holdings) in PDP and 100 changes (out of 200 holdings) in DWAS, repositioning both portfolios toward areas of leadership as we enter the second quarter. That is roughly on par with what we saw last quarter, but still more than we saw throughout periods of consistent leadership last year.

Below you'll find an update about the specific changes made in both strategies with the most recent index reconstitution. Keep in mind that removed positions likely no longer maintain characteristics of superior relative strength; meanwhile, additions have improved to a place of leadership and could be ideas to consider.

Invesco DWA Momentum ETF (PDP)

The stock-selection process behind the Invesco Dorsey Wright Momentum ETF (PDP) is simple yet robust. Every quarter, we apply the Relative Strength process to compare approximately 1,000 large and mid-cap US stocks and select the strongest 100 names. The quarterly reconstitution process's goal is to weed out the weak names and realign the portfolio toward strength. As mentioned before, with this most recent reconstitution and rebalance, we removed 45 stocks and added 45 new stocks, which we've compiled in the tables below. Several observations:

• Technology stocks maintain their position as the largest weighted sector, adding an additional 5% with the most recent trades.
• Consumer cyclical stocks lost the largest percentage of allocation over the last quarter, dropping from 18% to 9%.
• Energy lost all of its allocation with Q3 changes (-4%) as the sector remains a point of weakness from a momentum standpoint.
• Alphabet (GOOGL) was a notable addition to the portfolio as it stormed back to new highs through the third quarter. COST was a notable removal.

Invesco DWA SmallCap Momentum ETF ([DWAS)

The stock-selection process used in DWAS is like PDP. Every quarter, we apply the Relative Strength process to compare approximately 2,000 US-listed small-cap stocks and select the strongest 200 names. With this most recent reconstitution and rebalance we pushed the portfolio towards strength by removing 100 stocks and adding 100 new stocks, which we've outlined in the table below. However, and perhaps unique to DWAS, not all stocks that were removed are technically weak. We have received this question in the past, so we want to address it here.

One reason for these removals is due to stocks exceeding the market cap filter. High-momentum stocks should, ideally, increase in market cap which means that sometimes a name will exceed the small-cap maximum at the end of a quarter. This is not the norm, but worth keeping in mind when reviewing the changes. Several takeaways:

• Healthcare names earned the largest additional percentage with the most recent change. While the broader sector is still weak, Biotechnology (which are typically smaller names) have been standouts.
• Financial names shed the largest allocation this quarter, dropping 10% to account for now 19% of the total portfolio.
• Industrial representatives are still a large overweight within the fund, accounting for roughly 23% of the total portfolio. Real estate and utilities standout as low weight sectors.  

Disclosures:

This article is intended for Financial Professional Use Only.

Management and other expenses can have a material impact on performance when compounded over time. Past performance, hypothetical or actual, does not guarantee future results. In all securities trading there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown.

Click here for more information from Invesco on the Invesco DWA Momentum ETF (PDP): https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=PDP

Click here for more information from Invesco on the Invesco DWA SmallCap Momentum ETF (DWAS): https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=ETF-DWAS

Dorsey, Wright & Associates, LLC is owned by Nasdaq, Inc. and we have affiliates who also provide financial services, research, information, and act as Brokers/Dealers to a wide variety of clients. Our affiliates use the information we create to create indexes, which are then used to create Exchange Traded Funds. These things create a potential conflict of interest in that we may have an incentive to promote or use the products and services of our affiliates and business partners. A number of Dorsey Wright representatives are registered with and hold securities licenses with the affiliate broker-dealers. In this capacity, they assist with the marketing and distribution of Exchange Traded Products.