Barron’s 400 ETF Selections Reflect Strength of U.S. Economy with Growth at a Reasonable Price Found within Financials, Industrials, Energy
September 24, 2018
DENVER–(BUSINESS WIRE)–$AAPL #B400–The Barron’s 400 ETF (NYSE Arca: BFOR), a smart beta exchange-traded
fund that seeks to track the Barron’s 400 Index (B400), has completed
its semi-annual rebalance based on the reconstitution and equal
weighting of its underlying benchmark. B400 was designed to give
investors a means of tracking some of America’s highest-performing
companies based on the strength of their financials and the
attractiveness of their share prices. Launched in 2007, B400 was jointly
developed by Barron’s, America’s premier financial magazine, and
MarketGrader, an independent equity research and indexing firm. In order
to adhere to B400’s growth at a reasonable price (GARP) investment
philosophy, the Index is reconstituted and rebalanced twice a year,
ensuring B400 is composed of the top-ranked stocks from the universe of
U.S. equities covered by MarketGrader’s research, regardless of sector
or market capitalization.
Prominent large-cap additions to B400 include1 Visa (V),
Intel (INTC), Lowe’s (LOW), Caterpillar (CAT), EOG Resources (EOG), CSX
(CSX) and Synchrony Financial (SYF). Notable large-cap deletions include2
Verizon (VZ), Boeing (BA), AbbVie (ABBV), Walt Disney (DIS), Time Warner
(TWX) and Celgene (CELG). Among the 42 companies selected for the first
time, some of the highest ranked stocks3 are Nektar
Therapeutics (NKTR), Cactus (WHD), Broadcom (AVGO), Bank OZK (OZK),
Qurate Retail (QRTEA) and First Commonwealth Financial (FCF).
On a sector basis, Consumer Discretionary, Energy, and Materials saw the
biggest net gains in number of constituents, adding 9, 4 and 3
components, respectively. Financials and Industrials maintained the
largest weighting in B400, with 80 companies, or 20% of the Index, the
maximum sector allocation allowed according to B400’s rules-based
methodology. Tying for third largest sector weighting were Consumer
Discretionary and Technology, the latter shedding a further 4 members,
with 63 constituents each. Both remain below their 10-year average
allocation in B400 of 73 and 69 companies, respectively.
Carlos Diez, CEO and Founder of MarketGrader said, “From a sector
standpoint, the reconstituted Barron’s 400 Index reflects the strength
of the U.S. economy, particularly among names most dependent on domestic
earnings growth. Case in point, this is the ninth consecutive selection
period that Financials reached the 20% maximum allocation permitted in
B400, with most names in the sector in the mid-cap range and in
industries such as Regional Banks. This run of overweighting to its
10-year average allocation of 14% also stands in stark contrast to the
sector’s nadir in March 2009, when B400 selected only 20 Financials to
its roster a week after the bear market reached bottom. The continued
robustness of manufacturing in the U.S. has also been captured in the
latest rebalance; it is the fifth in the last seven B400 semi-annual
periods in which Industrials hit the sector limit. Lastly, B400’s
methodology continues to find plenty of growth at a reasonable price in
the rebounding Energy sector, which achieved its largest allocation in
B400 since March 2009 and is now overweight to its 10-year average
allocation.”
From a size perspective, the newly reconstituted B400 again traded up,
replacing 6 mid-cap and 4 small-cap constituents with 10 large-cap names
to achieve an average market-cap of $19.6 billion. With only 64
constituents below $1 billion in the new class, B400’s allocation to
small-cap stocks reached a record low in the history of the Index.
B400’s constituents are equal weighted, each representing 0.25% of the
Index upon rebalance, eliminating the tendency in traditional market
capitalization weighted indexes of the largest companies to
disproportionately impact performance.
_______________
1 In descending order by market cap, as
of 09/11/18.
2 In descending order by market cap, as of
09/11/18.
3 In descending order by MarketGrader ranking,
as of 09/11/18.
Diez added, “While tariff and trade war-related economic issues and
worries about record market highs dominate headlines, the fundamental
picture of domestic stocks’ balance sheets remains strong, especially
for an Index that identifies quality companies that can generate
attractive growth without overpaying for it. Though B400 finds the
market’s sweet spot in mid-cap names, the Index selectively cut its
allocation to small-caps in favor of large-caps again, suggesting
concerns about a slowdown in global growth are not reflected on large
companies’ balance sheets in a systematic fashion.”
The reconstitution has once again raised the fundamental health of the
Index; the average MarketGrader score for B400 companies is now 71,
compared to 67 for the March selection class. This increase is a
function of B400’s design, which selects the 400 highest scoring
companies listed on U.S. exchanges every six months. MarketGrader’s
equity rating system assigns nearly all investable U.S. stocks a grade
on a scale of 0-100 based on a proprietary combination of 24 fundamental
indicators across 4 categories of fundamental analysis – growth, value,
profitability and cash flow – picking the top ranking companies for
BFOR’s underlying Index after screening for size and sector
diversification as well as liquidity.
In total, 149 companies were added to the Index upon the rebalance, a
turnover rate of 37.25%, below B400’s historical turnover average of
41.7%. 67 companies have been members of the Index for at least 2
consecutive years (4 reconstitutions). Of this group, 14 constituents
have been B400 members for at least 5 years, including Ulta Beauty
(ULTA), Apple (AAPL), TJX Companies (TJX), Credit Acceptance Corporation
(CACC) and Grand Canyon Education (LOPE) 4.
For more information about the Barron’s 400 ETF (BFOR), please visit http://www.barrons400etf.com.
About MarketGrader
MarketGrader is a Miami-based provider of independent global equity
research and indexes that was founded on the belief that fundamental
analysis and transparency are central to better investment
decision-making. Formed in 1999, MarketGrader offers investors an online
research service that aggregates financial data
on publicly traded companies and analyzes them based on a proprietary
quantitative methodology using 24 fundamental indicators across growth,
value, profitability and cash flow. The company’s growth at a reasonable
price (GARP) methodology is designed to identify consistent creators of
economic value, as it believes such stocks are the best long-term
generators of shareholder value. Since its first index was constructed
in 2003, MarketGrader Indexes have provided an alternative to
traditional market capitalization weighted benchmarks, selecting
constituents based on fundamentals rather than size. MarketGrader
Indexes cover Domestic, International and Global equities from a global
universe of more than 36,000 companies in 94 countries, representing
over $83 trillion in market capitalization. In 2007, MarketGrader
created the Barron’s 400 Index in conjunction with Barron’s, America’s
premier financial magazine. Follow us on Twitter @MarketGrader and
connect with us on LinkedIn.
About SS&C Technologies
SS&C is a global provider of investment and financial software-enabled
services and software for the global financial services and healthcare
industries. Founded in 1986, SS&C is headquartered in Windsor,
Connecticut and has offices around the world. Some 13,000 financial
services and healthcare organizations, from the world’s largest
institutions to local firms, manage and account for their investments
using SS&C’s products and services.
About ALPS
ALPS, which was acquired by SS&C in April 2018, provides customized
asset servicing and asset gathering solutions to the financial services
community through an entrepreneurial culture based on the commitment to
“Do Things Right.” Founded in 1985, ALPS continues to actively promote
all of its various business segments, from asset servicing through ALPS
Fund Services, Inc. to asset gathering through ALPS Distributors, Inc.
and ALPS Advisors, Inc. Headquartered in Denver, with offices in Boston,
New York, Seattle, and Toronto, ALPS, a wholly-owned subsidiary of DST
Systems, Inc., today represents more than 400 employees, over 200
clients, and an executive team that has been in place for more than 18
years. For more information about ALPS and its services, visit www.alpsinc.com.
Information about ALPS products is available at www.alpsfunds.com.
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4 In descending order by MarketGrader
ranking, as of 09/11/18.
Important Disclosures
An investor should consider investment objectives, risks, charges
and expenses carefully before investing. To obtain a prospectus, which
contains this and other information, call 1.855.724.0450 or visit www.barrons400etf.com.
Read the prospectus carefully before investing.
There are risks involved with investing in ETFs including the loss
of money. Additional information regarding the risks of this investment
is available in the risks section of the prospectus.
Barron’s 400SM ETF shares are not
individually redeemable. Investors buy and sell shares of the Barron’s
400SM ETF on a secondary market. Only market
makers or “authorized participants” may trade directly with the Fund,
typically in blocks of 50,000 shares.
“The Barron’s 400 IndexSM” is calculated by
NYSE Euronext or its affiliates and published by MarketGrader.
“Barron’s®,” “Barron’s 400SM” and
“Barron’s 400 IndexSM” are trademarks or
service marks of Dow Jones & Company, Inc. or its affiliates and have
been licensed to MarketGrader. One cannot invest directly in an index.
Barron’s© is a service mark of Dow Jones &
Company, Inc. and has been licensed to MarketGrader Capital LLC for use
with the Barron’s 400 IndexSM and sublicensed
for certain purposes by ALPS Advisors, Inc. ALPS’s Barron’s 400SM
ETF based on the Barron’s 400 IndexSM, is not
sponsored, endorsed, sold or promoted by Dow Jones, or its affiliates,
and Dow Jones and its affiliates make no representation regarding the
advisability of investing in such product.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the
Barron’s 400SM ETF.
ALPS Portfolio Solutions Distributor, Inc. are not affiliated with
Barron’s or MarketGrader.
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BAR000187 9/24/2019
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0948
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jmolgano@sscinc.com