Money to be made???

[s_dooley24]

Is it a feasible/wise investment decision to buy stocks that are going to be added into an ETF? For example, I own QQQQ (Nasdaq 100 Trust) and they must rebalance at the end of the year. Its a pretty good bet that these ten stocks are going to be added:

Figure 1. These 10 Stocks Could Be Added To The Index...

GOOG Google Inc.*# $404.91
NIHD NII Holdings 43.45
PTEN Patterson-UTI Energy* 31.24
EXPE Expedia Inc. 24.89
NVDA NVIDIA Corp.* 36.15
URBN Urban Outfitters* 30.91
CDNS Cadence Design Systems* 17.12
ATVI Activision Inc.* 13.31
RHAT Red Hat Inc.* 23.57
CKFR CheckFree Corp. 46.85

Some of these stocks will even take more then 1 trading day to acquire as noted in the excerpt:

We did not find significant buying pressure across all of the additions, although for two names, Expedia, Inc. (EXPE) and Cadence Design Systems (CDNS), it appears that the index trust may need to buy more than one day?s worth of trading volume (Figure 4). Cadence Design Systems could experience the most pressure of the two, as its days to buy is estimated at 1.4.

Would it make sense to purchase these two stocks and then sell them after the rebalance?

 

[selkirk]

Dooley sometimes it can be worthwile. I have not done much research on the moves (of coarse they move up ) but when the stock makes the biggest moves.

find that many stocks get bid up if most investors believe they will make an index. In Canada income trusts were announced to be included in the main index. all of the big income trusts got a lift even though it was months before they were included.

the best situation would be a find a company you like that could be included in the future. also would not want own a comapany that is dropped from an index ( market cap, lack of volume, ect.)

would only buy a company that I believe is a good investment based on fundamentals ie. earnings, revenue.

good luck with the trades dooley.

thanks
selkirk

 

[s_dooley24]

Dooley sometimes it can be worthwile. I have not done much research on the moves (of coarse they move up ) but when the stock makes the biggest moves.

find that many stocks get bid up if most investors believe they will make an index. In Canada income trusts were announced to be included in the main index. all of the big income trusts got a lift even though it was months before they were included.

the best situation would be a find a company you like that could be included in the future. also would not want own a comapany that is dropped from an index ( market cap, lack of volume, ect.)

would only buy a company that I believe is a good investment based on fundamentals ie. earnings, revenue.

good luck with the trades dooley.

thanks
selkirk

Thanks

 

[selkirk]

Dooley Google went up on the day it went in the index but it had another news item that the market viewed as positive and that led to most of the move.

In Canada most of the large income trusts that went into the index actually went down on the day. Riocan reit, HR reit, It is thought that most index funds, (pension funds) bought the issues before and so most of the move was in the stocks before it happened.

thanks
selkirk