The Barron's 400 Index, or B400, was jointly developed by Barron's and MarketGrader and introduced on the cover of the September 3, 2007 issue of Barron's magazine. The index "collects the most fundamentally sound and attractively priced stocks from all corners of the market, using a proven and disciplined stock-selection process." It does not strive to be a benchmark representing the overall market but rather to give investors access to America's most promising stocks. Nearby you may read more about its methodology and its construction process directly from Barron's by clicking on any of the issues on display or you may download the official index fact sheet.
It's an innovative measure of U.S. securities, made up of companies that score highest when evaluated against fundamentals-based criteria. Calculated by NYSE Euronext, the Barron's 400 combines proprietary analytics* with a rules-based approach.
The Barron's 400 is built from the "bottom-up" using a methodology that is quite different from most traditional market benchmarks. Its key attributes:
All index components are selected on the basis of their fundamental strength as measured by MarketGrader's overall grade. This grade is based on 24 fundamental indicators across growth, value profitability and cash flow, each measured by six unique factors, in many cases industry or sector-specific indicators. The result from all 24 indicators is a single numerical score--our overall grade--from zero to 100, which ultimately determines the stocks selected to the Barron's 400.
All 400 index components are equally weighted in the index at each semi-annual rebalance. This prevents a small minority of huge companies from steering the index, while giving smaller issues equal opportunity to contribute to the Barron's 400's overall performance. By definition, then, each stock represents, after each selection, one quarter of one percent of the overall index.
Once all stocks in MarketGrader's universe of 6,000 are graded and ranked, a series of screens is applied to ensure the index is diversified and that its underlying components have sufficient liquidity. The number of entries from any single sector is capped at 80, or 20% of the index, while REITs are altogether ineligible. All stocks must have a minimum float-adjusted market cap of $250 million while at least 25% of the components must have a market cap of $3 billion. And to ensure liquidity, all stocks must have a minimum three-month average dollar-trading volume of $2 million.
Every six months, on the third Friday of March and September, the Barron's 400 Index goes through a reconstitution and rebalance process. This ensures that only those companies with the strongest fundamentals are regularly selected.
"The Barron's 400 Index SM" is calculated by NYSE Euronext or its affiliates and published by MarketGrader. "Barron's®," "Barron's 400SM" and "Barron's 400 Index SM" are trademarks or service marks of Dow Jones & Company, Inc. or its affiliates and have been licensed to MarketGrader.