At the beginning of September, we covered the release of the Barron’s 400, an equal-weight index that uses a proprietary rating system developed by MarketGrader.com. Today, Barron’s announced its semi-annual reallocation of stocks in the index - a move which uprooted almost half of the stocks in the portfolio. Further, the magazine hinted at upcoming investment vehicles tied to the Barron’s 400 (including a possible Exchange Traded Fund).
Taking Profits, Seeking Profits
The new portfolio allocations are shown below in Figure 1, and show profit taking in Oil & Gas and a move into Health Care. This makes sense from a portfolio management perspective. Even though I remain bullish on certain aspects of energy, it is absolutely the right move to lock in returns and reallocate funds. Further, the move into health care is a sound one, especially given the aging boomer population and the increasing demand for health related products and services.
I continue to like this index - The equal-weight approach, unlike the S&P 500, prevents large market cap stocks from “steering the ship”. That is, just because the market cap of the biggest stock in the index is 10% of the total index market cap, doesn’t mean it should account for 10% of the portfolio. That amplifies the downside when that stock takes a hit.
Barron’s 400 ETF
Barron’s also hinted at the possibility of an Exchange Traded Fund and other products tied to the index in the future. We’ll stay on top of this, as I believe this is a market beating opportunity. In fact, the B400 is up almost 12% this year, vs. the S&P 500’s 8% year to date return.
Figure 1
