The objective of the Barron’s 400 Index is to serve as a benchmark for investors seeking capital appreciation from the U.S. equity market. While this might seem repetitive to our regular readers, it is worthwhile repeating yet again for the benefit of our newer readers in order to provide the proper context for those that intend to follow it as a core investment, particularly when so many “strategy” indexes abound.
As Barron’s so succinctly put it when it first introduced the index to its readers in 2007, B400 “picks America’s most promising companies.” The correct emphasis, here, should be on companies. It is a collection of America’s most valuable, most profitable and most promising enterprises that make the index what it is. Thus, a claim on B400 is a claim on the best slice of what American private enterprise offers and the possibility of participating alongside their success through the capital appreciation of their publicly traded shares. Yet, as our readers know, B400 is not a static benchmark focused on tracking a specific size or sector segment of the U.S. market; rather, it is a dynamic benchmark that adheres to a twice-a-year selection process based on MarketGrader’s growth at a reasonable price (GARP) investment philosophy. As a result, companies are judged regularly on their fundamental performance and their attractiveness as an investment, regardless of their pedigree. And considering that the underlying universe from which B400 is selected is about 4,800 U.S. listed companies, only the top 8%, or so, makes it to the index, a truly high hurdle. While many companies come and go and some make it to B400 for brief periods of time, while many never make it at all, a small group of companies has made it to the index pretty regularly, which is truly remarkable considering the level of competition and the breadth of fundamental indicators used in grading the underlying universe’s financial performance. Thus, in today’s issue we introduce them to you as the Barron’s 400 Index Hall of Fame.
Please click here for our introduction to the Barron’s 400 Hall of Fame piece.
As you’ll read in the paper, we plan a deeper dive into the fundamentals of these Hall of Fame companies in coming issues as we try to identify what we call the “GARP trait.” What makes these companies so special and, more importantly, why do they continue to be such attractive investments despite a collective capital appreciation (for the Hall of Famers as a group) of more than 8.5 times since the index’s inception? Stay tuned to future Newsletters and our GARP Lens blog for clues on the answer to that question and further analysis of what has so far proven to be a very successful strategy.
