I did some rough calculations on how many shares of MTW the S&P 500 funds have.
As of June 30, 2009 Vanguard 500 had 14.035 billion in market value. Vanguard had 1.250 million shares of MTW at that time.
I read a site that said there was 141.3 billion in value of S&P 500 funds.
Extrapolating ... Vanguard 500 has about 10% of the value of all S&P 500 funds.
Taking the number of shares Vanguard had of MTW of 1.25 million shares and multiplying by 10 gives about 12.5 million shares of MTW held by the S&P 500 funds.
MTW has about 131 million shares altogether. So the stress of unloading from the funds over the next few days amounts to roughly 10% of the total float.
MTW has traded already 5.4 million shares in less than 2 hours on the first day of the announcement. Now, not all the selling is from the funds. I'm sure alot of retail investors are panic selling also.
I also noticed that 4 million shares traded the first hour. The 2nd hour it won't even hit 1/2 of that.
In conclustion... the worst is over on this announcement. I imagaine it will ebb and flow from now until the close next Monday (when MTW is removed from the index). During this time.. there are going to be some great buying opportunities.
In a nutshell ... the unloading of the appx. 12.5 million shares of MTW is not a disaster. Use it to your advantage. I know I am.
What about new small cap fund buying of MTW shares?
That should obviate some of the supply problem.
Also some of the indexed shares might be transferred to in-house small cap funds without exposure to the open market.
Gus Sauter at Vanguard is the king of Indexing. Jack Bogle is the father of index funds at the Beloved VGI 500 Index.
Anyways, MO Gains is onto something, I don't believe Vanguard will be selling, merely transfering into the S & P 600, as the market cap recovers, it will then transfer to the 400!!
Terex was yanked from the 500 Index last Fall.
My Shares at Vanguard are still there :).
David Blitzer is the Chairman of the S & P 500 Indexing Commitee.
I would encourage someone (I could also well) to make a post on the www.Bogleheads.org to see if we can get David to respond to the inclusion or in this exclusion from the 500, to 400, to the 600 index. I don't know if those exact details would be public so that traders don't over-run the stock.
Look at it this way, At least we are not a Micro-Cap Stock :).. We need a good laugh after the past 1.5 years!!
Good calcs, but the S&P issue is not the reason MTW will be dead money for a while. If you can wait 5+ years for a payoff, MTW is not a bad buy now. However, it is not my choice now as there are better places for faster gains. So, I'll wait until some actual signs of sector improvement show up, as there is a long way to go to get anywhere near where it once was.
I wonder if this might present the opportunity that might be desired by ITW or CAT to gobble them up somewhere south of $10 a share.
Cat has just under $4b in cash as of the end of 2q with another $15.7b in net receivables...
Might not be a bad play for them... total speculation of course
then you are calling this a Buy? wow. hold at best. surely, like others, you cannot find a better investment? you need to talk with someone.
this is not panic selling. it is dumping. for a good reason.
personally i will hold. would not consider this stock a buy at all. 80% of the dow is a better buy.
I'm an optimist. I don't think we're heading to the big depression. I do think that we have a very slow recovery coming.. with some upside surprise to that.
MTW is still making money. Look at there last 2 quarters.. and it did make money.
Standand and Poors has a target price of $8.50 For industrials... I can tell you S&P has only a few buys at this point. Most of the industrials have run up beyond their target prices. MTW has not run up to that extent.
So yes.. I think MTW is a buy. The artifical dampening of the price due to it's removal from the S&P 500 just makes MTW more attractive.
I understand that MTW is dropped from the S&P after next Monday, Aug. 31. Do we know for sure that funds required to sell shares must do so by that same day? Or is that something we are assuming, but don't know for sure? When MTW was added to S&P there was no immediate spike in volume which causes me to wonder.
The funds have until Monday close to unload their shares. I mentioned that in my post.
I also said that there will be buying opportunities during this time. The artificial discount goes away next Monday.