The ALPS Barron’s 400 ETF (BFOR) outperformed broader equity markets last week, as measured by the Russell 3000 Index, due to its higher quality growth-at-a-reasonable-price (GARP) fundamentals across its all-cap portfolio.
As earnings season begins, BFOR is substantially overweight to pro-cyclical sectors, including energy, industrials, financials, and materials (23.29% overweight as of July 15), where earnings are expected to be resilient to inflationary trends and higher interest rates, according to a recent insight from ALPS.
While multiple compression on future earnings has dented high-priced growth stocks so far in 2022 due to rising interest rates, BFOR is outperforming the Russell 3000 Growth Index by over 500 bps year-to-date due to its higher-quality growth selection process, according to ALPS.
“Despite the current recessionary fears, a reprieve in the strength of the US dollar and potential peak inflation with energy and commodity prices declining could act as catalysts for growth stocks to perform better, as was the case last week,” ALPS wrote. “Certainly, growth investors will be a little more discerning on valuations and quality should the growth stock rotation persist, which would extend the runway for BFOR to shine.”
BFOR’s largest portfolio gainer last week was healthcare staffing provider Cross Country Healthcare Inc. (CCRN, 0.35% weight as of July 15), which rose over 16% on earnings strength from a large healthcare insurer that cited increasing non-COVID patient procedures, ALPS wrote.
Catalyst Pharmaceuticals Inc. (CPRX, 0.32% weight as of July 15) also jumped over 13% last week after winning litigation over patent infringement and receiving exclusive rights to develop its drug, Ruzurgi, which treats muscle atrophy associated with Lambert-Eaton syndrome, according to ALPS.
Other ETFs tracking all-cap equities include the Dimensional US Core Equity Market ETF (DFAU), the SPDR S&P Dividend ETF (SDY), and the iShares Russell Mid-Cap Growth ETF (IWP).
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