The Barron’s 400 Index, along with other major U.S. equity benchmarks, took a breather during the year’s first quarter following 2013’s remarkable gains. Following an almost 6% drop through the first few days in February, as investors refocused on the Fed’s ongoing cuts in monetary stimulus and weaker than expected indicators for the U.S. economy, the index staged a nice comeback to end the quarter marginally higher from where it ended the previous one. Below we summarize its performance through March 31, 2014, along with some of the other widely followed benchmarks.
| Cumulative % | Annualized % | |||||||
| Index | Q1 2014 | 1 Yr. | 3 Yr. | 5 Yr. | 10 Yr. | 3 Yr. | 5 Yr. | 10 Yr. |
| Barron’s 400 | 1.5 | 28.4 | 48.5 | 201.9 | 147.9 | 14.1 | 24.7 | 9.5 |
| DJIA | -0.7 | 12.9 | 33.6 | 116.3 | 58.9 | 10.1 | 16.7 | 4.7 |
| S&P 500 | 1.3 | 19.9 | 41.2 | 134.7 | 66.2 | 12.2 | 18.6 | 5.2 |
| NASDAQ | 0.5 | 29.6 | 51.0 | 174.7 | 110.6 | 14.7 | 22.4 | 7.7 |
| DJ U.S. TSM | 1.5 | 20.9 | 41.7 | 145.0 | 78.6 | 12.3 | 19.6 | 6.0 |
Source: MarketGrader.com. All figures are price-only returns. All values for the Barron’s 400 Index prior to August 31, 2007 are based on back-tested data.
B400 Replaces 153 Companies in Latest Rebalance
B400 completed its semi-annual rebalance on March 21, in which it replaced 153 of its components from the September 2013 selection (six of which had been removed earlier in the period as a result of corporate events). Consumer Discretionary, Industrials and Financials started the new period with the largest sector representation. For more about the rebalance please click on the link below.
Barron’s 400 Index Rebalance Press Announcement
B400 was featured on the March 29 edition of Barron’s magazine, in which Brendan Conway discusses the index rebalance in his weekly ETF Focus column. Follow the link below to read it.
Following the publication of the column mentioned above, Brendan followed it with a very informative piece on his Blog on the inner workings of B400’s rebalance, particularly the role played by MarketGrader’s underlying fundamental methodology. It’s a must-read for those trying to understand where B400’s added value is created. You may access it by clicking on the link below.
Why Did the Barron’s 400 Boot Celgene?
A Look Ahead at the Upcoming Earnings Season for B400 Components
John Prestbo published a very nice piece this week in the Barron’s 400 Diary column on what investors may expect from the earnings season that kicked off this week. We have reproduced it in its entirety below.
B400 Stocks Poised for Growth, But the Trajectory May Be Rocky By John Prestbo – 04/09/2014
According to the daily market reports, investors are again uncertain about the economic recovery. Too slow, too tepid, they seem to be saying as they sell many growth stocks and buy large-cap dividend payers. Given this environment, what is the growth outlook for the Barron’s 400 Index?
Still bright and optimistic, is the short answer. The average price-earnings ratio of Barron’s 400 stocks on April 4 was 20.9, which seems a little rich for the current mood. But divide that by the profit growth rate of these companies and you get the more informative PEG ratio. The median on April 4 was 0.82. A number less than one shows recent growth outpacing the current price for reported earnings. Substituting forecasted profit growth for historical growth produces a median ratio of 0.60—which almost shouts growth.
From another perspective, however, the view is less sanguine. Security analysts have predicted per-share earnings and revenues quarter by quarter for this year. We summed those forecasts for each sector and then calculated quarterly changes from one to the next. (As a starting point, we also used estimates for the quarter just ended on March 31.) Earnings and revenues are normally compared to year-earlier results, partly to minimize seasonal differences. We chose sequential comparisons for this table to mimic how the fluctuations would be revealed to investors throughout the year. Here are the results:
| Q2 Over Q1 | Q3 Over Q2 | Q4 Over Q3 | ||||
| Earnings | Revenue | Earnings | Revenue | Earnings | Revenue | |
| Consumer Discretionary | 26.74% | 3.88% | 21.58% | 0.20% | 5.54% | 9.63% |
| Consumer Staples | 21.40% | -1.36% | 4.44% | 1.37% | -4.64% | 4.48% |
| Energy | 10.79% | 5.25% | 9.01% | 4.22% | -2.30% | 2.52% |
| Financials | 3.01% | 2.80% | -3.89% | 0.67% | 17.45% | 1.53% |
| Health Care | 13.74% | 2.61% | 1.31% | 0.46% | 6.06% | 3.29% |
| Industrials | 24.43% | 5.27% | -0.15% | 0.72% | -2.83% | 0.59% |
| Materials | 6.22% | -1.87% | -2.32% | -0.45% | 5.79% | 5.92% |
| Technology | -7.33% | -2.36% | 5.00% | 2.35% | 20.53% | 18.92% |
Basically, analysts are expecting growth to start strong this year and then taper off, as shown in the two consumer sectors, energy and industrials. Financials and technology buck the trend with forecasts that jump high in the fourth quarter. Overall, though, these sectors end the year with improved earnings, according to these predictions, but the quarterly course is volatile.
It’s good to remember that forecasts often vary widely from what actually happens. Still, these predictions indicate growth is anticipated. And rocky growth is better than none.
