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Play XOUT ETF & Be Exposed to High Potential Large-Cap Stocks

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With the global markets on a volatile ride thanks to tensions related to the coronavirus spread, lockdowns, higher inflation and oil price volatility, looking for quality stocks is investors’ natural choice. There are plenty of criteria or metrics that can lead investors to quality stocks and help them rule out the underperforming ones.

GraniteShares has come up to help investors in this regard with its product U.S. Large Cap ETF (XOUT - Free Report) .  

Inside XOUT

The underlying GraniteShares XOUT U.S. Large Cap ETF seeks to track the performance, before fees and expenses, of the  XOUT U.S. Large Cap Index. The fund charges 60 bps in fees. The total number of holdings are 251 stocks. The fund currently has an asset base of $127.9 million.

Instead of picking the winners, XOUT tweaks the investing paradigm by seeking to recognize companies likely to underperform, and excluding them from the portfolio, per the factsheet of XOUT fund. Technological disruption is transforming businesses across all industries.  XOUT takes the 500 largest U.S. companies, and discards 250 names that may be falling behind to adapt.

The factsheet went on to describe that “Passive investing buys everything in the market, even companies in long-term decline. XOUT seeks to detect losers with quantitative scoring, and attempts to leave them OUT.”

The fund invests about 42% in Information technology, followed by healthcare (16.57%), consumer discretionary (14.01%) and communication services (13.83%). Apple (9.41%), Microsoft (8.12%) and Amazon (7.25%) are the top three stocks of the fund as of Jul 15, 2021.

You will be surprised to know that XOUT excludes several big names like Tesla, JP Morgan, Mastercard, Proctor & Gamble and Bank of America. The fund (up 4.74%) has outperformed the S&P 500 (up 2.33%) in the past month as of Jun 30, 2021. In the one year, XOUT was up 35% while S&P 500 was up 33.2%.

How Does It Fit In a Portfolio?

Having exposer to the winning stocks via an ETF is a great technique as if we go by the S&P 500 investing, we do not have options to segregate winners and losers. But XOUT helps us to achieve that objective.

Moreover, the fund is heavy on Information Technology – the most high-demand sector amid the pandemic. More coronavirus cases mean more uncertainty in health emergency and the related economic recovery. This also ensures a prolonged period of social distancing norms and continued surge in digitization. Plus, the latest correction in tech shares opens up a great opportunity to enter the space.

Other sectors that sectors are heavy on are healthcare and consumer discretionary. Both sectors have been on an uptrend currently. So, investors are likely to gain from this ETF and its sector exposure (read: Pharma & Healthcare ETFs at a One-Year High: Here's Why).


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