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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis
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To: chester lee who wrote (2472)6/20/2000 10:46:00 PM
From: Q.  Read Replies (1) of 2506
 
Chester - good idea to check the list of institutional shareholders for index funds. I didn't think of that.

These funds typically use "sampling" so that they don't have to own all 2000 stocks. That's probably why you found a stock on the Russell 2000 that isn't held by any index funds.

I wonder how many of the other funds, which aren't overtly index funds, might actually own these stocks because they are "closet indexers."

re. CNQR, I may have erred by putting it on my list. The stock is at 5, but they have $3.78 per share of cash and very little debt. That makes it look too much like a value stock to short.

In fact, as I screened through the list of upcoming deletions, I found lots of profitable companies paying a dividend and lots of stocks that are depressed down nearly to the cash per share level. If those stocks get pushed down by a few weeks of index-fund selling, then they might become buys.

I'll also note that when I looked at the charts for the stocks about to be deleted, I noticed quite a few that had a point or two pop during the last couple of days of June and the first week of July, probably when they were added to the index. If I have time, I'll look at the list of stocks about to be added, to see if there are any I think are worthy of going long to play the pop.

The fact that these stocks have a virtually nil short position, as you noticed, indicates that nobody else is attempting to play these as a shortselling opportunity.
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