Rob Arnott Is Launching an ETF Made Up of Stock-Index Rejects.

Rob Arnott, founder of Research Affiliates, is launching an exchange-traded fund (ETF) called the Research Affiliates Deletions ETF. The ETF will buy companies that have recently been removed from major indexes, holding them for about five years or until they reenter a benchmark. Arnott believes that stocks that are added to major indexes tend to be overvalued, while those that are removed are undervalued. His past research shows that these "reject" stocks outperform the market by about 5% annually. The ETF, which will trade under the ticker NIXT, will track an index based on a proprietary methodology and will focus on US micro-, small-, and mid-cap value stocks. Arnott sees the strategy attracting investors who are looking for exposure to firms that index funds might not hold. [Extracted from the article]