S&P index inclusion of mREITS to benefit NLY and AGNC
S&P starts including mREITS in their indices on March 15th and will announce constituent changes March 22nd. Various index funds and ETF's such as SPY will then have to buy mREITS. I am long WMC right now but flat AGNC, both based relative valuation. When the index changes come out AGNC will rally relative to WMC because it has such a larger market capitalization than WMC. If we get a great post ER pop on WMC I will probably take profits and rotate on over to AGNC to play the forthcoming index inclusion pop on AGNC.
Hi Frederic. AGNC and NLY are the only two mREITS that I happen to know of that are big enough to meet the $4B minimum for SP500 (SPX) inclusion. WMC's market cap will make it eligible for the SP Small Cap 600 (SML) if it meets all the other eligibility requirements.
For example I'm not sure WMC will pass the IPO test this time around:
"Treatment of IPOs. Initial public offerings should be seasoned for 6 to 12 months before being considered for addition to an index."
It's up to someone at SP to make that judgement call because WMC falls within the 6-12 grey area window.
Also, I have no idea what criteria will be used to measure "financial viability" for testing mREITS for inclusion.
The eligibility criteria are on standardandpoors website, click on the index then the "methodology" pdf.
Please read through it and let me know whether you think WMC will be included or not this time around.
Thanks for the heads up, Taymere. Here is part of the news release:
NEW YORK, Feb. 27, 2013 /PRNewswire/ -- S&P Dow Jones Indices today announces revisions to S&P Global Indices, S&P U.S. Indices and Dow Jones Global Indices to be effective with the March quarterly review after the close of trading on Friday, March 15:
All weekly share change announcements will be made on Fridays at 5:15 pm for implementation the following Friday night (Monday morning effective date). Previously, all weekly share changes were announced on Wednesday night for implementation the following Wednesday night.
Mortgage REITs (GICS code 40402030) will now be eligible for inclusion in S&P Global Indices and S&P U.S. Indices provided they meet all other index inclusion criteria. Previously, mortgage REITs were not eligible for inclusion.