Three stocks are getting dropped from the S&P 500. This ETF sees them as rebound candidates

Friday was the last day that American Airlines , Etsy and Bio Rad Laboratories traded as members of the S & P 500 , after a recent bout of underperformance resulted in their falling to smaller cap indexes . But that demotion may be a sign that a rally is coming soon, according to Research Affiliates founder Rob Arnott. Stocks like these are the backbone of the Research Affiliates Deletions ETF , launched earlier this month.

The new fund uses custom indexes based on market caps to identify the "deleted" stocks, but Arnott said the historical performance is similar over time to using the actual changes in the S & P 500 or Russell 1000, which have other considerations besides pure market value of each company. The custom indexes rebalance once a year in the spring, and NIXT already holds Etsy and Bio-Rad, though not American Airlines.

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