The Barron's 400 ETF (NYSE: BFOR), a smart beta spin on U.S. equities, recently added to its exposure in the energy and financial services while reducing its allocation to consumer discretionary stocks. BFOR seeks to add stocks sporting favorable growth at a reasonable price (GARP) traits.
The energy sector is this year's worst-performing group in the S&P 500 and financial services stocks, though higher, are lagging broader indexes as well. Both sectors figure prominently in an array of exchange-traded funds focusing on value stocks. BFOR tracks the Barron’s 400 Index (B400).
“The rules-based, fundamentals-driven 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,” according to the issuer.
BFOR is an equal-weight ETF and none of its components account for more than a quarter of a percent of the fund's weight. At the end of the second quarter, BFOR allocated a combined 42.4 percent of its weight to consumer discretionary and technology stocks. Financial services and healthcare names combined for 31.7 percent of the ETF's weight at that time.
“On a sector basis, two of the sectors with typically lower Index representation, Energy and Consumer Staples, saw the biggest net gains in number of constituents, adding 15 and 5 components, respectively,” according to MarketGrader, which developed BFOR in conjunction with Barron's. “B400 nearly doubled its allocation to Energy, now with 31 members, up from 16 names following the March selection period. Financials have the largest weighting in B400, with 80 companies, or 20% of the Index.”
Although many of the new additions to BFOR and its underlying index are large-cap stocks, the benchmark is primarily mid-cap as such stocks account for over 56 percent of its weight. However, the index's exposure to large-caps has grown to 22.2 percent.
“In total, 157 companies were added to the Index upon the rebalance, a turnover rate of 39%, below B400’s historical turnover average of 42%. 81 companies have been members of the Index for at least 2 consecutive years (4 reconstitutions),” according to MarketGrader.
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