Barron's 400 Index definition
Tracks the performance of the most promising, carefully selected stocks in the US market
What is Barron's 400 Index?
Barron's 400 index or B400 is a stock market index created by Barron's, a financial magazine, and MarketGrader (a financial research company), in 2007. The index consists of a portfolio of 400 small, mid, and large-cap stocks. Stocks included in the index are chosen in accordance with the expected value creation for investors, and the index considers only US stocks traded on NYSE or NASDAQ.
The index is composed of companies coming from different industries, and the number of stocks from one industry can be a maximum of 20 per cent. Some of the industries included in the index are technology, financials, oil and gas, health care, consumer services, etc.
Real estate investment trusts are excluded from the B400 analysis, and they cannot be part of the index. Companies without financial reports for the past six months are also excluded from the index listing analysis.
Barron's 400 Index meaning
Every stock included in the index has an equal weight. Therefore, the index is not impacted by a small number of large market-size companies. Instead, all companies, irrespective of their market size, can affect the index value equally. The index is conducting bottom-up fundamental analysis in order to rank the companies. Based on 24 fundamental factors, the analysis identifies companies that will provide the highest value for shareholders in the future. The factors included in the analysis are grouped into the following categories: growth, value, profitability, and cash flow. The analysis is executed solely by a computer algorithm with the data provided.
Barron's 400 Index explained
The stocks are selected based on specific criteria and requirements and on the expectations of increased benefits for shareholders. The Barron's 400 index has outperformed other indexes in the past couple of years.
All stocks included or to be included should have a float-adjusted market capitalisation of at least $250m. In addition, 25 per cent or more of the constituents should have a market cap of at least $3bn. In terms of liquidity, the requirement is that each stock should have $2m or more average trading volume in a three-month period. A review of companies included in the index is performed every six months, in March and September.