The ‘Anti-Mag 7’ ETF Is Up 12% and Looks Ready To Run

Quick Read

• The Defiance Large Cap ex-Mag 7 ETF (XMAG) posted a 13.54% return year-to-date by excluding the Magnificent 7 stocks from the S&P 500.

• XMAG outperformed the calculated 7% return of the S&P 500 without the Magnificent 7 by roughly 650 basis points.

• The ETF tracks 493 large cap stocks with top holdings including Broadcom and Eli Lilly instead of Apple or Nvidia.

• If you’re thinking about retiring or know someone who is, there are three quick questions causing many Americans to realize they can retire earlier than expected. take 5 minutes to learn more here

It’s no secret that the S&P 500’s amazing bull run of the past several years has been led by the AI tech “Magnificent 7” stocks, which are also the top stocks by market cap. These stocks include some of the first US stocks to crack the trillion dollar market cap valuation ceiling. The Magnificent 7 includes: Apple (NASDAQ: AAPL), Alphabet (Google) (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Meta Platforms (Facebook) (NASDAQ: META), Microsoft, Nvidia (Nasdaq: NVDA), and Tesla.

Fueled by the gigantic interest in AI, the Magnificent 7 account for more than half of the S&P 500’s year-to-date gains. The S&P 500’s returns at the time of this writing are roughly 16%. Take away the Magnificent 7 stocks, and that figure drops to 7%. Given the fact that a number of market watchers of note, including Michael “The Big Short” Burry think that the AI sector has become a bubble about to burst, investors are seeking alternatives to hedge their substantial gains in VOO, SPY, and other S&P 500 ETFs. One of the ways to continue the gains from the S&P 500 without the downside risks of Magnificent 7 exposure is to invest in an ETF that tracks the S&P 493, i.e., the S&P 500 sans Magnificent 7 stocks. The Defiance Large Cap ex-Mag 7 ETF (NASDAQ: XMAG) fits that description to a tee.

A Virtual S&P 493 Index?

The BITA US 500 ex-Magnificent 7 Index tracks a rebalanced S&P 500 without the Magnificent 7 largest market AI cap stocks, effectively making it an index for the S&P 493.

BITA GmbH is a German Fintech company founded in 2018.  Among its unique indexes are: *

• BITA Canada 50 Index (BCA50G)

• The FreeCap Financial BITA Decarceration Index

• Five New Thematic Indexes (Themes ETFs partnership)

Created in October 2024, The BITA US 500 ex-Magnificent 7 Index was intended to cover a diversified range of large cap stocks. By offering an alternative greater diversification without the AI sector concentrated overweighting to investors an ETF tracking this index could conceivably hedge their potential volatility and risk exposure to the Magnificent 7 stocks if fears over an AI bubble proved to be correct.  The BITA US 500 ex-Magnificent 7 Index rebalances quarterly.

The BITA US 500 ex-Magnificent 7 Index top 10 constituent stocks are:

• Broadcom

• Eli Lilly & Co.

• JP Morgan Chase

• Berkshire Hathaway Class B

• Visa Class A

• Johnson & Johnson

• Exxon Mobi

• WalMart

• Mastercard

• Netflix

The Defiance Large Cap ex-Mag 7 ETF

The Defiance Large Cap ex-Mag 7 ETF is currently the only game in town for investors seeking an S&P 500 without any Magnificent 7 exposure.

Debuting in tandem with the BITA US 500 ex-Magnificent 7 Index to be its ETF correspondent, The Defiance Large Cap ex-Mag 7 ETF has barely been in operation for a year, but has posted some impressive results to date. Surprisingly, instead of the anticipated 7%, the ETF itself is boasting 13.54% YTD return. A look at the current portfolio allocation shows a slight deviation from the index:

• Broadcom - 4.65%

• Eli Lilly & Co. - 2.45%

• JP Morgan Chase - 2.16%

• Berkshire Hathaway Class B - 1.77%

• Visa Class A - 1.48%

• Cash & Other - 1.41%

• Johnson & Johnson - 1.30%

• Exxon Mobil - 1.29%

• WalMart - 1.22%

• Mastercard - 1.16%

•  

The sizable cash component might be a contributor, but is not likely the primary reason for a roughly 650 basis point advantage over its calculated mathematical equivalent. Although not explicitly stated, a likely explanation is that the proportionate reweighting of greater diversification towards a couple of biotech/pharma, a financial firm, a couple of credit card companies, a conglomerate, an energy company, and a retail chain spread the diversification and proportionately strong returns that they can offer when not underweighted in the shadow of AI.

Additional details about XMAG are as follows:

YTD Return

13.54%

1-Year Return

8.61%

P/E Ratio

23.57

Avg Daily Volume

36,149

NAV

$21.99

YTD high

$23.44

Net Assets

$58.81 million

YTD low

$17.07

Beta (5year)

n/a

Return from Inception

10.77%

Inception Date

10/21/2024

Expense Ratio

0.35%

At the time of this writing, XMAG has no direct rivals in the “S&P 493” category, making it uniquely the only game in town for investors seeking S&P gains without Magnificent 7 exposure and risk. Ironically, Defiance Chief Investment Officer Sylvia Jablonski is a big AI fan and advocate of Nvidia, Microsoft, and other Magnificent 7 stocks. She has touted AI companies on her frequent appearances on Bloomberg, CNBC, and other financial news programs.

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