DENVER, Colo.--(BUSINESS WIRE)--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 Amazon.com (AMZN), Johnson & Johnson (JNJ), Alphabet (GOOGL), Bank of America (BAC), Bristol-Meyers Squibb (BMY), Lockheed Martin (LMT), and Charles Schwab (SCHW). Notable large-cap deletions include2 Pfizer (PFE), Comcast (CMCSA), Starbucks (SBUX), Lowe’s (LOW), United Parcel Service (UPS) and Southwest Airlines (LUV). Among the 30 companies selected for the first time, some of the highest ranked stocks3 are Solaris Oilfield Infrastructure (SOI), SIGA Technologies (SIGA), Bryn Mawr Bank (BMTC), GrafTech International (EAF), Hubbell Incorporated (HUBB) and LPL Financial (LPLA).
On a sector basis, Health Care and Technology saw the biggest net gains in number of constituents, adding 11 and 7 components, respectively. Despite these gains, B400’s allocation to Health Care remains below its 10-year average of 12%, while Technology, currently the third largest sector in the Index, is just a half point above its historical average of 17%. 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. The biggest net losers were Consumer Discretionary and Materials, which both lost 5 constituents. B400 continues to pare exposure to the Consumer Discretionary sector; with 58 members and a 14.5% weighting, it remains below its 10-year average of 73 constituents or an 18% allocation.
Carlos Diez, CEO and Founder of MarketGrader said, “From a sector standpoint, the continued strength of Financials is remarkable. The sector reached its 20% cap for the tenth straight rebalance, or 5 full years, which is the longest such stretch on record across all sectors in the history of B400. More broadly, this reflects the ongoing fundamental health of the U.S. economy as we approach the tenth anniversary of the current economic expansion. Another notable point is the near doubling of U.S. steel companies in B400, even though the allocation to Materials decreased overall. This suggests B400’s rules-based stock selection methodology is identifying some pockets of opportunity within the domestic steel industry as the effects of U.S. tariffs on imported metal take hold.”
From a size perspective, the newly reconstituted B400 replaced 2 large-caps and 1 small-cap with 3 mid-cap names to achieve an average market-cap of $23.6 billion and a median market cap of $3.7 billion. Though size changes were marginal, B400 continues its overweight to large-caps (>$10 billion) relative to its historical average, while underweighting small caps. With only 63 constituents below $1 billion in the new class, B400’s allocation to small-cap stocks reached another record low. 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.
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 outgoing September 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, 196 companies were added to the Index upon the rebalance, a turnover rate of 49%, well above B400’s historical turnover average of 41.8% and the largest rotation of members in eleven years, since the March 2008 rebalance as well as the highest turnover since BFOR’s 2013 inception. Diez pointed to 2018’s market turbulence, stating, “Much of the historically high turnover likely has to do with the significant market drawdown that occurred in the last months of 2018. The bigger the market dislocation, the greater the chances for changes to company valuations and thus the greater the changes to a company’s overall MarketGrader ranking, which results in more variation than usual as B400 uncovers the most attractive GARP buys.”
62 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 Magellan Midstream Partners (MMP), Biogen (BIIB), Ulta Beauty (ULTA,), TJX Companies (TJX) and Apple (AAPL)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 37,000 companies in 94 countries, representing over $78 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. For more information, please visit www.marketgrader.com.
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 Portfolio Solutions Distributor, 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.
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.
ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc. are affiliated.
*Registered Representative of ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc.
BAR000195 3/18/2020
1 In descending order by market cap, as of 03/05/19.
2 In descending order by market cap, as of 03/05/19.
3 In descending order by MarketGrader ranking, as of 03/05/19.
4 In descending order by MarketGrader ranking, as of 03/05/19.
