The Barron’s 400 ETF (NYSEArca: BFOR) and its underlying benchmark, the widely observed Barron’s 400 Index (B400), underwent some notable changes at the most recent semi-annual rebalancing, revealing companies that have undergone shifts in their fundamental strengths.
The Barron’s 400 Index selects 400 stocks from the MarketGrader U.S. Coverage Universe by using a methodology that selects components based on the strength of their fundamentals in growth, value, profitability and cash flow and then screens components for certain criteria regarding concentration, market capitalization and liquidity.
The rules-based index was designed to provide investors a way to track some of the highest-performing U.S. companies based on the strength of their financial statements and the attractiveness of their share prices, according to a press release.
To maintain the index’s growth at a reasonable price investment philosophy, the index is reconstituted and rebalanced twice a year. The rebalancing act also reveals what companies have fallen behind, along with firms that are on the up-and-up.
For instance, prominent additions to the B400 include JPMorgan Chase (NYSE: JPM), Verizon Communications (NYSE: VZ), Altria Group (NYSE: MO) and United Parcel Service (NYSE: UPS). Moreover, among the 58 companies selected for the first time, standouts include GrubHub (NYSE: GRUB), LendingTree (NasdaqGS: TREE), Blue Nile (NasdaqGS: NILE) and the recently merged Walgreens Boots Alliance (NasdaqGS: WBA).
However, notable companies that were removed from the list include Microsoft (NasdaqGS: MSFT), Facebook (NasdaqGS: FB), Wal Mart (NYSE: WMT), Celgene (NasdaqGS: CELG) and 3M (NYSE: MMM).
After its recent change up, the underlying index now tilts toward small-caps, which suggests that companies with a focus on domestic U.S. growth and less exposure to overseas markets are fundamentally more attractive. The newly reconstituted B400 will have an average market capitalization of $18.3 billion, compared to $19.1 billion back in March.