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Barron's 400 ETF Boosts Energy, Industrial Exposure

ETF Professor

The Barron's 400 ETF (NYSE: BFOR), an exchange-traded fund tracking the Barron’s 400 Index, increased its exposure to the energy, industrial and materials sectors following the fund's most recent semi-annual rebalance.

“Launched in 2007, B400 was jointly developed by Barron’s, America’s premier financial magazine, and MarketGrader, an independent equity research and indexing firm,” according to a statement. “In order to adhere to B400’s growth at a reasonable price (GARP) investment philosophy, 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.”

The cyclical energy, industrial and materials sectors saw the largest increases in BFOR's lineup following the fund's rebalance. BFOR is up 2 percent year-to-date and about 16 percent over the past 12 months.

Rebalancing Act

On a combined basis, the energy, industrial and materials sectors combined for 27 additions to BFOR's roster. Energy led the way with 12 additions followed by eight new industrial components and seven new holdings from the materials sector.

“Financials and Industrials have the largest weighting in B400, with 80 companies, or 20 percent of the Index, the maximum sector allocation allowed according to B400’s rules-based methodology,” according to the statement.

BFOR lost nine technology holdings, but that sector is still the ETF's third-largest sector exposure. BFOR now holds 67 technology names. Consumer discretionary accounts for 13.5 percent of BFOR's underlying index and is the benchmark's fourth-largest sector weight, but that group is lighter by a dozen names in BFOR following the rebalance.

Other Sector Trimmings

Along with consumer discretionary, BFOR's benchmark also reduced its exposure to health care stocks.

“The decline in Consumer Discretionary and Health Care stocks brings their current weights in B400 to their lowest levels since March of 2009 and 2014, respectively, and well below their averages,” said MarketGrader CEO Carlos Diez.

Conversely, financials and industrial stocks have hit their maximum allotment in BFOR's index for seven consecutive rebalancing periods, said Diez.

BFOR measures components based on 24 traits across the growth, value, profitability and cash flow factors.

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