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As It Hits $100M In Assets Under Management, XOUT Proves Exclusion Matters

January 27, 2021 8:15 am
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As It Hits $100M In Assets Under Management, XOUT Proves Exclusion Matters

When investing in a fund, be it a mutual fund, index fund or exchange-traded fund, what's inside is of the utmost importance. After all, that's what determines investors' outcomes.

What Happened: The GraniteShares XOUT U.S. Large Cap ETF (NYSE:XOUT) proves what's left matters, too. Investors seem to agree because XOUT, which debuted in October 2019, recently topped $100 million in assets under management.

“XOUT takes a novel approach to passive ETF investing by seeking to avoid losers being disrupted by technological innovation, rather than picking winners,” according to GraniteShares. “The XOUT methodology examines the 500 largest U.S. companies and excludes the bottom 250 stocks deemed most at risk using a rules-based, quantitative-driven framework.”

Why It's Important: XOUT tracks the XOUT US Large Cap Index. One of the pillars of the fund is eschewing stocks based on historical performance and avoiding companies that are ill-equipped to deal with changing, disruptive macro and market trends.

Data confirm XOUT's methodology works as the ETF is higher by almost 31% over the past year.

“Since fund inception, the XOUT Index has returned 49.33% compared to the S&P 500’s 33.70% return, resulting in 15.63% outperformance,” according to GraniteShares.

Proving what's left makes a difference, XOUT allocates just 0.04% of its weight to energy stocks and has no exposure to the utilities sectors. Those were the two worst-performing groups in the S&P 500 last year.

XOUT focuses on factors such as revenue growth, employee growth, reinvestment in company stock, earnings sentiment, research and development, management performance and profitability to determine what stocks should not make the cut.

What's Next: Of course, what's included in XOUT matters, too. That includes a roughly combined 64% weight to the technology, consumer discretionary and communication services sectors, giving the fund a growth feel.

Some of XOUT's obvious growth components include Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA).

The fund also has plenty of quality with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Johnson & Johnson (NYSE:JNJ) found among its top 10 holdings.

XOUT charges 0.60% per year, or $60 on a $10,000 investment.


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