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

By John Seetoo Published Nov 27, 10:33AM EST

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.

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The ‘Anti-Mag 7’ ETF Is Up 12% and Looks Ready To Run — © LumineImages / iStock

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 | AAPL Price Prediction), 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

Concept image of an exchange-traded fund（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.

About the Author John Seetoo →

After 15 years on Wall Street with 7 of them as Director of Corporate and Municipal Bond Trading for a NYSE member firm, I started my own project and corporate finance consultancy. Much of the work involves writing business plans, presentations, white papers and marketing materials for companies seeking budgetary allocations for spinoffs and new initiatives or for raising capital for expansion or startup companies and entrepreneurs. On financial topics, I have been published under my own byline at The Motley Fool, a673b.bigscoots-temp.com, DealFlow Events’ Healthcare Services Investment Newsletter and The Microcap Newsletter, among others. Additionally, I have done freelance ghostwriting writing and editing for several financial websites, such as Seeking Alpha and Shmoop Financial. I have also written and been published on a variety of other topics from music, audiophile sound and film to musical instrument history, martial arts, and current events. Publications include Copper Magazine, Fidelity (Germany), Blasting News, Inside Kung-Fu, and other periodicals.