Barron's 400 ETF Rebalance Expands Exposure To Cyclical Sectors While Cutting Back On Technology

Rhea-AI Summary

The Barron's 400 ETF (BFOR) underwent a semi-annual reconstitution on September 17, 2021, replacing 175 of its constituents, slightly above the historical turnover of 42.2%. This adjustment highlights a preference for large-cap healthcare stocks, including Regeneron and Moderna, while decreasing the technology sector's representation to the lowest in two years. The rebalancing reflects a growing focus on cyclical sectors and signals a robust economic recovery, with 34 new companies joining the index. BFOR remains committed to selecting stocks based on strong financial fundamentals.

Positive

• Increased exposure to cyclical sectors, indicating economic recovery.
• Addition of 34 new companies, enhancing diversification.
• Focus on large-cap healthcare stocks with strong growth characteristics.

Negative

• Reduction in technology sector representation to its lowest level in two years.

DENVER, Oct. 11, 2021 /PRNewswire/ -- The Barron's 400 ETF (NYSE Arca: BFOR), a smart beta exchange-traded fund that seeks to track the Barron's 400 Index (B400), completed its most recent semi-annual reconstitution and rebalance on Friday, September 17, 2021. Following the new stock selection, B400 replaced 175, or 43.8%, of its constituents, slightly above its historical average turnover of 42.2%. 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 and focus on long-term capital appreciation, 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 Include Regeneron Pharmaceuticals (REGN), Vertex Pharmaceuticals (VRTX), Intuitive Surgical (ISRG), Moderna (MRNA), Stryker Corp. (SYK), and Gilead Sciences (GILD), underscoring a trend favoring large cap health care names with strong growth characteristics and reasonable valuations.

From a sector standpoint, besides the underlying strength seen among large cap health care names mentioned above, two other trends stood out following the most recent rebalance, according to Carlos Diez, MarketGrader's CEO. The first was the increase in cyclical names across the Consumer Discretionary, Energy, Industrials, and Materials sectors, which, in the aggregate had a net gain of 21 companies relative to the March selection. Combined with the maximum permissible 80-company allocation to Financials, this trend underscores the strength of the U.S. economy as it continues its post-Covid recovery. "Such a robust exposure to industries most dependent on U.S. economic strength makes B400 a unique, broad, and well diversified way for investors to participate in the country's ongoing economic renaissance without having to do individual stock selection themselves," said Diez.

The second noticeable trend from B400's new selections is the reduction in the total number of Technology names selected to the Index; the sector had a net loss of 10 names and its new 68-count total puts it at its lowest level in two years. It also puts it two stocks below its historical count of 70 selections per rebalance period.

A total of 92 industries are represented in B400, with Regional Banks having the most companies in the Index for a single industry (47), followed by Medical Specialties (22), Specialty Stores (19), Semiconductors (17), and Homebuilding (11). At the other end of the spectrum, 27 industries are represented by a single company each.

Thirty-four companies were selected to B400 for the first time ever, with the five largest being Moderna (MRNA), Carrier Global (CARR), Seagen (SGEN), Textron (TXT), and ZoomInfo Technologies (ZI). On the other hand, 65 companies have been members of B400 for at least two years, with 13 having been selected to B400 for five consecutive years, while 39 returned to B400 after an absence of at least two years.

The reconstitution has once again raised the fundamental health of the Index. 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 four 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. The 221 companies retained by B400 from the March selection had an average MarketGrader grade of 75.2, whereas the 175 companies that were replaced had an average grade of 61.5 (four companies has been removed from the Index in between rebalance periods because of corporate actions). The 179 newcomers at this most recent rebalance had an average MarketGrader grade of 73.5.

Among the current constituents following the latest B400 reconstitution, 15 companies have been selected to the Index in at least 30 different semi-annual periods (equivalent to 15 calendar years). The 10 companies with the most overall selections include Microsoft (MSFT) – 43 selections, Nike (NKE) – 39 selections, Apple (AAPL) – 36 selections, PepsiCo (PEP) – 36 selections, FactSet Research (FDS) – 35 selections, Johnson & Johnson (JNJ) – 35 selections, Best Buy (BBY) – 34 selections, T. Rowe Price (TROW) – 34 selections, Cognizant Technology Solutions (CTSH) – 33 selections, and Oracle (ORCL) – 33 selections.

For standardized performance of the fund and other important information about the Barron's 400 ETF (BFOR), please click here to visit http://www.barrons400 etf.com.

Past performance is not indicative of future results.
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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 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 39,000 companies in 94 countries, representing over $108 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 services and software for the financial services and healthcare industries. Founded in 1986, SS&C is headquartered in Windsor, Connecticut, and has offices around the world. Some 18,000 financial services and healthcare organizations, from the world's largest companies to small and mid-market firms, rely on SS&C for expertise, scale, and technology. Additional information about SS&C (Nasdaq: SSNC) is available at www.ssctech.com.

About SS&C ALPS Advisors
SS&C ALPS Advisors, Inc., a wholly-owned subsidiary of SS&C Technologies, Inc., is a leading provider of investment products for advisors and institutions. Headquartered in Denver, CO with over $18 billion under management as of September 30, 2021, ALPS Advisors is an open architecture boutique investment manager offering portfolio building blocks, active insight, and an unwavering drive to guide clients to investment outcomes across sustainable income, thematic and alternative growth strategies. For more information, visit 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 400^SM ETF shares are not individually redeemable. Investors buy and sell shares of the Barron's 400^SM 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 Index^SM" is calculated by NYSE Euronext or its affiliates and published by MarketGrader. "Barron's®," "Barron's 400^SM" and "Barron's 400 Index^SM" 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 Index^SM and sublicensed for certain purposes by ALPS Advisors, Inc. ALPS's Barron's 400^SM ETF based on the Barron's 400 Index^SM, 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 400^SM 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.

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SOURCE SS&C / ALPS Advisors

FAQ

What changes were made during the BFOR ETF rebalancing in September 2021?

BFOR replaced 175 constituents, increasing exposure to cyclical sectors while reducing technology stock count.

How many companies were added to the Barron's 400 ETF during the reconstitution?

A total of 34 new companies were added to the Barron's 400 ETF during the reconstitution.

What is the significance of the Barron's 400 ETF's focus on large-cap healthcare stocks?

The focus indicates a trend favoring large-cap healthcare firms with promising growth potential and reasonable valuations.

How does the Barron's 400 ETF ensure quality in its stock selection?

BFOR utilizes MarketGrader’s equity rating system, selecting stocks based on a combination of 24 fundamental indicators.