Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some Barron's 400 companies to your portfolio but don't have the time or expertise to hand-pick a few, the Barron's 400 ETF (NYSEMKT:BFOR) could save you a lot of trouble. Instead of trying to figure out which Barron's 400 companies will perform best, you can use this ETF to invest in lots of them simultaneously. The Barron's 400 index features 400 equally weighted stocks, chosen for being promising according to 24 indicators, such as cash flow, growth, and value.
ETFs often sport lower expense ratios than their mutual-fund cousins. This ETF, focused on Barron's 400 companies, sports an expense ratio -- an annual fee -- of 0.65%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF is too new to have a sufficient track record to assess, but in its first six months, it gained close to 20%, versus just 13% for the S&P 500. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why Barron's 400 companies?
The Barron's 400 index is new but promising, offering wide diversification, but also some discrimination in its selection, as it seeks especially promising holdings. It's also equally weighted, meaning that some Barron's 400 companies won't dominate and overshadow others.
More than a handful of Barron's 400 companies had strong performances over the past year. CalAmp (NASDAQ:CAMP) soared 280%, and that includes a 10% drop when the wireless-communications specialist posted estimate-topping earnings for its third quarter but also tempered expectations. The company has been firing on all cylinders (third-quarter revenue was up 43%, for example), repeatedly surpassing analyst estimates and expanding abroad as well. Still, some now see it as overvalued, and analysts at B. Riley recently downgraded the stock to neutral.
Ambarella (NASDAQ:AMBA) surged 167%. It's a semiconductor company focused on video, with offerings such as surveillance cameras and the popular GoPro sports cameras. Analysts at Stifel recently reiterated their buy rating on the stock while raising their price target by 26% due to the company expanding and creating new markets. Some other firms downgraded Ambarella, though, creating a more attractive buying opportunity for believers.
Nu Skin Enterprises (NYSE:NUS) popped 87%, with the specialist in personal-care products and nutritional supplements recently yielding 1.5%. Nu Skin has taken some hits recently on news that Chinese officials, long opposed to multilevel-marketing business models (read: "pyramid schemes!"), were looking into its practices in the country. This is a big deal, as China accounts for about half of Nu Skin's revenue. Analysts have reacted in different ways, with those at Canaccord downgrading the stock from a "speculative buy" to hold and Deutsche Bank lowering its price target significantly but reiterating its buy rating, expecting the Chinese probe to be short-lived and cause minimal damage.
Other Barron's 400 companies didn't do quite so well over the last year but were still impressive. Phillips 66 (NYSE:PSX), for example, gained 41%. The company, in focusing on its core operations, recently sold its pipeline-servicing business to Warren Buffett's Berkshire Hathaway. Phillips 66 is poised to profit if the U.S. eases its restrictions on crude oil exports, and it's attractive for its diversification, too. Its stock yields 2.1%.
The big picture
If you're interested in adding some Barron's 400 companies to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.