Discussion in 'The Archives' started by cheryl, Jul 9, 2002.
It finally happened!!!!!!!!!!!!!
An interesting paper from NYU:
Price Effects of Addition or Deletion from the Standard & Poors 500 Index
For additions we find that the stock exhibits significant increases from the announcement through the change day, and then a decline from the change day through the release-ending period when the price steadied approximately 8% above its pre-announcement price.
63.00 after hours...........
Of course I am pleased with this but I don't understand how it happened. I thought we did not trade enough shares to meet the requirements of the S&P 500.
The S&P panel has the power to make decisions at their discretion. They look at companies as a whole rather than judging them based upon individual guidelines.
The stocks in the S&P 500 are meant to mirror the U.S. economy as a whole and the inclusion of the foreign stocks that were removed today meant that the index was not a true measure.
The inclusion of UPS makes perfect sense as UPS moves close to 5% of the U.S. GDP
( as represented by finished goods )
UPS has more than enough shares outstanding to be included in the S&P so in my opinion this was never an issue.
While the gain in price is a plus long term this puts UPS on the radar screen of all the analysts and wiil mean more coverage for UPS.
The only barrier now obviously is the contract and once that is resolved the wind should be at our backs.
85 seems a little more realistic now does it not ?
It was only a matter of time...
Interesting that of the 7 stocks named to the
S&P 500 Tuesday, only one, UPS, is down today. Go figure.
Perhaps UPS is the only one of them with a looming strike threat? Don't forget, the last one
cost $750 million....
Share price gains for companies added and removed from the S&P or any other index for that matter genarally give up the gains over the next few trading sessions.
The resulting gain or loss is the result of index funds selling the outgoing stocks and buying the incoming stocks to keep their fund true to the index they track.
Once complted the stocks drift back to previous levels as traders taking advantge of the moves exit the stock and they return to the previous patterns.
Of course an ongoing contract negotioation does not help.
Todays news should clear the way for the stock to trade higher.
In an article that was posted on Browncafe that was headlined "UPS profit falls in line with forecast, company to offer 32 million" dated 7/12/02, it was stated:
"With inclusion in the S&P 500, UPS has estimated that 70 million to 100 million new shares will be needed."
UPS will be officially added to the S&P500 index after the close of the markets tomorrow, 7/19/02.
I have totalled the trading volume since the S&P announcement after the market close of 7/9/02, and have found the following:
53,700,800 total shares traded since the announcement.
If the estimate of between 70 to 100 million shares being needed is true, then tomorrow should prove to be an extremely heavy day for UPS - possibly a trading volume of 16.3 to 46.3 million shares.
Hope this is true. If so, hold on to your hats, and enjoy the ride.
Damn I hope you are right !
Well folks, it certainly happened today! Early on we were up $1.80+, only to retreat back to being up only $.20 when I left the house at 2:30 CDT to play tennis. I was, needless to say, very disappointed.
Imagine my shock when I return home (after winning all 3 sets) to see that UPS closed up $4.95 at $67.00, on trading volume of 70,441,504.
Yesterday I suggested that everyone should hold on to their hats and enjoy the ride, with as much as 53.7 million shares to be traded. I suppose that I should have mentioned buckling your seat belt as well!
What a glorious day for UPS. Hopefully the overall market will hit bottom soon, and begin a strong, lengthy climb. Otherwise, I'm afraid that we will gradually give up much of this gain.
But for tonight, and this weekend - CONGRATULATIONS, and have a GREAT weekend!