REITS are Now the 11th Sector in the S&P 500

Written by Alex Shen, CFA and Andy Pratt on .

Freshly carved out of the Financial sector, REITs are the newest Sector in the S&P 500. Sectors – like Financials, Information Technology and Consumer Staples – are the broadest classification of stocks with industry groups and sub-industries further demarcation points. The weighting of financial stocks in the S&P 500 fell by a fifth and REITs now comprise 3.1% of the index giving them a higher weight than materials, telecoms and utilities.

REITs were previously grouped with financials because they shared some qualities with financial stocks. Both Financials and REITs, for instance, have been more volatile than the S&P 500 as a whole with standard deviation of 7% compared to the index’s standard deviation of 4%. But while mortgage REITs will continue to be classified as financial companies, the pairing with equity REITs made less sense as the correlation between eREITs and financial companies is less than the correlation between financials and the rest of the S&P 500.

Are Index Trends Signaling a Change in the Market?

Written by Alex Shen, CFA and Andy Pratt on .

Most widely-used stock indices you see, including the S&P 500, are weighted by market capitalization rather than weighted equally, giving the larger stocks in the index more sway over the index’s movement.  The 10 largest stocks by capitalization in the S&P 500, for instance, have the same weighting as 89 equally weighted stocks.

Because market-cap weighted indexes are heavily biased by the largest constituents, these indexes typically publish a less followed but insightful Equal Weight Index (EWI) that weighs each stock equally across the index.  Apple makes up 2.9% of the S&P 500 Index but just 0.2% in the S&P 500 EWI. 

By removing the extra influence large-caps have in the standard index, we are able to pick up on trends by comparing the performance of both the market-cap and the EWI version to see how smaller-cap constituents are performing relative to their larger peers.

Equal Weight vs Market Cap Indexes 6 30 16 no transparency

The recent returns of the S&P 500 indices show signs of size movement.  The large-cap S&P 500 is no longer outperforming the small-cap S&P 600 as it did in the prior 1-year period.  Mid-caps, as seen by the S&P 400, are now returning more than both small and large caps. And, interestingly, within each index, the EWI version outperformed the cap-weighted index indicating, at least in 2016, small-caps have taken the momentum from large-cap stocks.

Brexit Reaction

Written by Alex Shen, CFA on .

June 24, 2016 – The decision by the U.K. to leave the European Union after 43 years caught global investors off-guard.  On Thursday the stock market had a nice pre-Brexit-vote rally amid expectations that Britain would vote to stay. The pound crept up to its highest level this year. After the vote results released overnight with Brexit winning 51.9% vs 48.1%, financial markets everywhere plunged. At the time of writing, the S&P 500 was down 2.71%, the Dow dropped 2.61% and the Nasdaq lost 3.22%.
The Brexit vote is yet another example of the prevailing angry mood here and around the world.  The prosperity leading up to 2008 and the ensuing collapse created the conditions for a revolt.  Until either more time passes or those left behind regain their prior economic success, we should expect seemingly unsound political results like Brexit to occur as reflections of their anger.

Burney Company Named to 2016 Financial Times 300 Top Registered Investment Advisers

Written by Andy Pratt on .

FT 300 Advisers Logo 2016
June 16, 2016
– Burney Company is pleased to announce it has been named to the Financial Times 300 Top Registered Investment Advisers, as of June 16, 2016. The list recognizes top independent RIA firms from across the U.S.

This is the third annual FT 300 list, produced independently by the Financial Times Ltd. in collaboration with Ignites Research, a subsidiary of the FT that provides business intelligence on the investment management industry. Burney Company has been on the FT 300 list all three years.

The “average” FT 300 firm has been in existence for 22 years and manages $2.6 billion in assets.

The 300 top RIAs hail from 34 states and Washington, D.C. Burney Company, headquartered in Falls Church, VA, has been in business for 42 years and manages $1.5 billion in assets.

More than 1,500 pre-screened RIA firms were invited to apply for consideration, based on their assets under management (AUM). Applicants that applied were then graded on six criteria: AUM; AUM growth rate; years in existence; advanced industry credentials of the firm’s advisors; online accessibility; and compliance records. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange for inclusion in the FT 300.

The FT 300 is one in series of rankings of top advisers the FT produces in partnership with Ignites Research, including the FT 401 (DC retirement plan advisers) and the FT 400 (financial advisers from traditional broker-dealer firms).