Good evening, hope your day has been well. On to the update.
Today | 7 items
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1. Twitter enters the S&P 500
On Monday it was announced that Twitter (TWTR) will be apart of the S&P 500 index, replacing Monsanto.
What’s the big deal?
Vanguard, State Street, and Blackrock own the three largest index funds that track the S&P 500. Collectively, those funds manage more than $700 billion in AUM(assets under management).
It’s a big deal because those funds will be required to buy Twitter shares. In other words, Twitter found a new group of investors.
Who determines what companies make up the S&P 500?
Before we get to how the companies are selected, it’s important to remember that the S&P 500 represents 500 of the largest companies(not necessarily the largest 500) whose stock trades on the NYSE or NASDAQ.
The components of the S&P 500 are selected by a committee. While not strictly rules-based, here are a few of the criteria they use when making their selections.
- A market cap of $5.3 billion
- Headquartered in the U.S.
- At least a quarter-million of its shares traded in the previous six months
- The majority of its shares in public hands
- At least half a year since its IPO
The head of the committee who decides which stocks are in and which are out is David M. Blitzer. The WSJ wrote a nice profile about him.
For a real doozy, you can read their full methodology. PDF
2. Twitter: position update
Enough time has passed that I feel comfortable sharing a position our members hopefully took in Twitter on October 30th of 2017.
This stock represents 5% of our portfolio. The position, not the portfolio, has gained over 85% since we entered.
I do not share this brag. I’ve had plenty of losing trades and will have more in the future. I share because I hope it brings value to your investing process.
Let’s walk through this trade.