Weed Out Companies That Aren't Keeping up With Disruption

In the business world, it’s adapt or die and the wave of disruption occurring in all sectors is weeding out companies that will be slow or resistant to innovation. This presents an opportunity for the discerning investor by capitalizing on companies that can’t keep up with the changing times.

“The only constant is change,” an article in Fast Company said. “And these days, change happens fast in the corporate world. Even the most proven companies can lose their footing when innovative upstarts disrupt the status quo. But amid the pitched competition and continuous threat of disruption, established brands increasingly are embracing the benefits of playing offense.”

Disruption isn’t relegated to startup companies taking an idea and simply building its core business model around it. It also affects existing companies whose outdated business models can no longer stem the tide of disruptive forces on revenue generation.

“There’s no reason an incumbent can’t disrupt as well as a startup,” said Ralf Dreischmeier, senior partner at global consulting firm McKinsey & Company and a global leader of Leap by McKinsey. “Disruption can be an opportunity rather than a challenge.”

Change is a good thing when it comes to ETF options like the GraniteShares XOUT U.S. Large Cap ETF (NYSEArca: XOUT). XOUT seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the XOUT U.S. Large Cap Index.

The ETF basically takes a slab of S&P 500 and trims the unnecessary fat—what’s left are companies that aren’t averse to disruption and constantly innovating in order to adapt to an ever-changing business environment.

Fund advantages, per the GraniteShares website:

  • Aims to Leave Losers Out: Instead of trying to pick the winners, XOUT flips the investing paradigm by seeking to identify companies likely to underperform, and excluding them from the portfolio.
  • Forward Facing: Technological disruption is challenging businesses across all industries. XOUT takes the 500 largest U.S. companies, and eliminates 250 names that may be failing to adapt.
  • Alternative Indexing: Passive investing buys everything in the market, even companies in long-term decline. XOUT seeks to detect losers with quantitative scoring, and attempts to leave them OUT.

XOUT’s Top 10 holdings as of 9/30/19:

  1. Microsoft Corporation 6.49%
  2. Apple Inc. 6.28%
  3. Amazon.com Inc. 5.34%
  4. Alphabet Inc. Class A 5.28%
  5. Facebook Inc. Class A 3.15%
  6. JPMorgan Chase & Co. 2.30%
  7. Visa Inc. Class A 2.10%
  8. Johnson & Johnson 1.96%
  9. MasterCard Inc. Class A 1.72%
  10. Home Depot Inc. 1.58%

For more market trends, visit ETF Trends.