The Barron’s 400 Index (B400) delivered its best annual performance in eight years with a 31.4% total return in 2021, outdoing virtually every major U.S. equity benchmark, including the S&P 500 Index. This was B400’s best return since 2013, when the index gained 41.6%, also outperforming the broad U.S. market. An index B400 did not outperform in 2021 was its market cap-weighted sibling (B400 MCW), which gained 33.1%, also on a total return basis (we’ll be writing more about B400 MCW in upcoming posts, so please stay tuned). Figure 1 shows B400’s 2021 cumulative total return compared to large, mid, and small cap U.S. equity benchmarks as well as the popular Nasdaq 100 Index.
Figure 1. Cumulative U.S. Index Total Returns in 2021
B400’s performance in 2021 extended a remarkable run that started following the brief bear market suffered by U.S. equities during the first quarter of 2020 as the Covid-19 pandemic overtook global markets in what proved to be a short-lived drawdown. Between Dec. 31, 2019, and March 23, 2020, the market’s low point for the year, B400 lost 37.6%, on par with the 37.4% decline suffered by the equal weighted version of the S&P 500 Index (both figures based on total returns). However, from the March 2020 low through the end of 2021, B400 rallied 149.1%, outperforming both versions of the S&P 500 Index, the small and midcap indexes, and even the technology-laden Nasdaq 100, as illustrated in Figure 2. While the latter holds many of the large technology names that benefited from the pandemic-induced work-from-home trend, B400 more than held its own in no small part thanks to its broad exposure to solid companies in cyclical industries that were well positioned to benefit from a resurgence in U.S. economic activity. Figure 3 illustrates the sector breakdown for the 711 companies held by the B400 during calendar year 2021.
Figure 2. Cumulative U.S. Index Returns Between March 23, 2020, and December 31, 2021.
|Index||Total Cumulative Return|
|Barron’s 400 Index||149.1%|
|S&P 500 Index||119.0%|
|S&P 500 Index (Equally Weighted)||133.6%|
|S&P MidCap 400 Index||139.1%|
|Russell 2000 Index||128.5%|
|Nasdaq 100 Index||136.0%|
Figure 3. Sector Breakdown of All Barron’s 400 Index Holdings in Calendar Year 2021
Breaking Down the Companies
The B400 Index reconstitutes and rebalances in March and September, which means that over a full calendar year B400 holds three different ‘portfolios.’ The first portfolio of 400 companies is the one that it starts the calendar year with (which was reconstituted in September of the previous year), which is held through the March rebalance. When the Index reconstitutes in March, this determines the year’s second 400-company portfolio, which it then holds through its September reconstitution and rebalance. Finally, when the B400 reconstitutes in September, the third portfolio of companies it holds in the year is determined.
During 2021, the three portfolios that were held by BFOR comprised a total of 711 different companies, including the 400 companies selected by the B400 in September 2020, March 2021, and September 2021. Thirty-six (36) of these were selected twice after having skipped the middle period between March and September; counting these as separate holdings, the B400 held a total of 747 positions in 2021. Of these, 73% (or 542 holdings) had a positive return during their time as members of the B400, while only 27% (or 205 holdings) posted a negative return . It’s worth noting that 137 companies that were members of the B400 at the start of the year (selected at the September 2020 rebalance) are still part of the index (34% of current constituents). Figure 4 summarizes the number of companies that were members of the B400 across different time periods during 2021.
Figure 4. Barron’s 400 Unique Constituents by Selection Period In the 2021 Fiscal Year
|Period||# of Companies|
|Sept. 2020 to March 2021||131|
|Sept. 2020 to Sept. 2021||96|
|Sept. 2020 to March 2022||137|
|Sept. 2020 to March 2021 & Sept. 2021 to March 2022*||36|
|March 2021 to Sept. 2021||84|
|March 2021 to March 2022||84|
|Sept. 2021 to March 2022||143|
were removed at the March 2022 reconstitution, and were then re-selected
in September 2021 reconstitution. Source: MarketGrader Research.
The average return among the 542 holdings that recorded a gain was 25.2%, while the 205 holdings that declined in value lost an average of 11.2% (both are based on price returns). Figure 5 shows the 20 best performing B400 holdings of 2021.
Figure 5. Top 20 Performing Stocks in the Barron’s 400 Index During Calendar Year 2021
|Symbol||Company Name||Market Cap* (in USD Millions)||Sector||Start Date||End Date||Return (%)|
|ATKR||Atkore International Group Inc.||1,243||Industrials||9/21/20||3/18/22||170.47|
|VIAC||ViacomCBS Inc. Class B||16,972||Cons. Discretionary||9/21/20||3/19/21||161.27|
|DISCA||Discovery, Inc. Class A||11,144||Cons. Discretionary||9/21/20||3/19/21||156.8|
|MCB||Metropolitan Bank Holding Corp.||373||Financials||3/22/21||3/18/22||112|
|SFBS||ServisFirst Bancshares Inc||1,821||Financials||9/21/20||3/18/22||110.82|
|WIRE||Encore Wire Corporation||1,359||Industrials||3/22/21||3/18/22||106.55|
|CROX||Crocs, Inc.||2,522||Cons. Discretionary||9/21/20||3/18/22||104.63|
|CPRX||Catalyst Pharmaceuticals, Inc.||297||Health Care||9/21/20||3/18/22||102.69|
|ANET||Arista Networks, Inc.||11,469||Technology||9/21/20||3/18/22||97.89|
|BXC||BlueLinx Holdings Inc.||548||Industrials||9/20/21||3/18/22||94.4|
|CCS||Century Communities, Inc.||1,067||Cons. Discretionary||9/21/20||3/18/22||86.82|
|EPAM||EPAM Systems, Inc.||17,023||Technology||9/21/20||3/18/22||86.54|
|ODFL||Old Dominion Freight Line, Inc.||20,466||Industrials||9/21/20||3/18/22||83.62|
|AMAT||Applied Materials, Inc.||55,440||Industrials||9/21/20||3/18/22||82.34|
|WAL||Western Alliance Bancorp||3,485||Financials||9/21/20||3/18/22||79.57|
B400 is tracked by the Barron’s 400 ETF (NYSE Arca: BFOR)