The Barron’s 400 Index, which is celebrating its third anniversary this month, rebalanced its constituent list on Monday before the market opened for trading. The index replaced 179 of its constituents with new selections, for a turnover of 44.75%. This was slightly higher than its historical average of 169 constituent replacements at each six-month rebalance, or 42.33%, and its historical median of 43.50%. The biggest semi-annual turnover the index has had in its 13-year history (back-tested between December 1997 and September 2007) occurred in March 2008 when it replaced 200 of its components, or 50%. The smallest turnover happened in September 2002 when it replaced 118 companies, or 29.50% of its constituents.
While it may seem like B400 turns over a large number of companies every six months, its overall turnover is in line, or even lower, the the average actively managed mutual fund. And a closer look at its rebalance history shows that many companies have made the index for long stretches of time or have made the selection on many individual occasions. In fact, of the 25 rebalances to date, since the original selection on 12/31/97, 107 companies have made the index 13 times or more, which is more than 50% of all rebalances. And 247 companies have made it into the index on at least ten occasions.
Even though no company has made the index every single time it has rebalanced, two companies have missed the cut only once in 25 selections: Microsoft and Wal-Mart. Amgen has made it 23 times followed by Harley-Davidson, Johnson & Johnson and Pepsi, which have been selected 22 times. The list of companies in the exclusive 20+ selection club is rounded out by Nike, Oracle, IBM, Home Depot, Abercrombie & Fitch (last selected in March 2008), Apollo Group and Bed Bath & Beyond, all with 21 selections, and Strayer Education with 20 selections.
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