As I just stumbled upon this issue while trying to create an object from a TSubclassOf, I noticed that the first parameters of NewObject is the Outer or the owner class, the second parameter is the UClass to create the object from. So the correct way to call it would be (UE4 4.20)
UDamageType* dmgType = NewObject<UDamageType>(this, DamageTypeClass);