I mentioned this briefly in June’s state of the markets, but perhaps the most mysterious area of the market for me in the past few years has been index adds/deletions. There’s no area of the market I hear so many investors talking about (seriously, talk to any small cap investor about an off the run idea, and at some point you’ll hear “this will qualify for inclusion in the Russell next year, and that’ll result in hundreds of thousands of shares to buy”), and there’s no area of the market with such intense focus where the result has been so lackluster IMO (to use the example I used on the podcast, BUR got added to the Russell in June. BUR has ~220m shares outstanding, and the Russell add called for just shy of 30m shares to be bought. Somehow, the stock was down ~10% in the month leading up to that huge buy. I have no clue how a block that big (it represented basically a full month’s worth of trading volume!) can cross and have the stock leak lower the whole month into the block).
Thank you again. I am encouraging you to write more blog posts similar to this one :-).
Very useful. Please post more deep and short dives.
I generally post individual ideas on the premium side, but made an exception for this one (and rcm i suppose)