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Consumer Discretionary Stocks Account for 40% of B400’s Gain This Year

John A. PrestboJohn A. Prestbo

Like many other stock-market indexes, the Barron’s 400 Index is setting records this spring. But it is doing so in its own unique way.

That’s because the Barron’s 400 doesn’t look like other indexes. Its component stocks are from companies that MarketGrader has analyzed as being among the financially strongest in the country. As a result, the sector makeup of the Barron’s 400 doesn’t match those of the S&P 500, the Russell 3000 and the Dow Jones Total Stock Market Index.

Here is how the current sector weights in the Barron’s 400 compare to those of the Dow Jones U.S. Total Stock Market Index, a benchmark that includes all the U.S. exchange-listed stocks:

Sector Barron’s 400 DJ U.S. TSM
Consumer Discretionary 24.46% 13.22%
Industrials 19.87% 12.60%
Technology 16.03% 14.30%
Financials 13.42% 18.35%
Health Care 11.55% 11.72%
Energy 5.83% 9.65%
Consumer Staples 5.80% 10.82%
Materials 2.59% 2.89%
Utilities 0.26% 3.74%
Telecommunications 0.21% 2.72%

Only health care and materials are in alignment between the two indexes. Among the others, the Barron’s 400 is comparatively heavier in three and lighter in five. These differences have a direct effect on performance.

For example, “defensive” stocks have been important contributors to the broad market rally this year. But they chipped in a little less than 16% of the Barron’s 400 return through May 10. By contrast, stocks in the cyclical consumer discretionary sector—the heaviest in the index—contributed 40% of the advance.

The following table shows how much each of the 10 biggest sectors added to the Barron’s 400 gain of 16.33% this year through May 10. The sectors are listed in descending order of weight, like in the first table.

Contribution Cont. Rank
Consumer Discretionary 39.73% 1
Industrials 14.04% 5
Technology 13.61% 6
Financials 25.84% 2
Health Care 16.25% 3
Energy -12.58% 10
Consumer Staples 15.74% 4
Materials -10.86% 9
Utilities -1.77% 8
Telecommunications -0.01% 7

Bottom line: The Barron’s 400 has been setting its records with stocks that were not leading the broad-market rally for much of this year. Cyclical stocks recently have taken market leadership, but the Barron’s 400 was there first.

John Prestbo, senior advisor to MarketGrader Capital, was formerly editor and executive director of Dow Jones Indexes. He was also chairman of the Dow Jones Index Oversight Committee. During his time at Dow Jones Indexes he worked, along with Barron's and MarketGrader, on the development of the Barron's 400 Index. Prior to that, Mr. Prestbo worked as an editor and writer for The Wall Street Journal in various capacities, including page-one editor, commodity news editor and markets editor. Mr. Prestbo has co-authored or edited several books over the past 30 years. The most recent was "The Market's Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average," published by Dow Jones Indexes in 1999 and "Barron's Guide to Making Investment Decisions" which he helped to compile and edit in 2006. Mr. Prestbo won the University of Missouri Award for Distinguished Business Writing in 1967 and the George M. Loeb Achievement Award for Business Writing in 1968. In 2007, he won the William F. Sharpe Indexing Lifetime Achievement Award. That same year, he was honored for his leadership by Dow Jones Indexes during its celebration of 10 years as a separate business unit.

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