Deutsche Bank predicts RIMM deletion from NASDAQ 100
Last night, the NASDAQ announced that Facebook (FB) will replace Infosys (INFY) in the NASDAQ-100 index. This change will become effective next Tuesday, December 11, after market close. This is merely the first swap in what is an annual Index reconstitution tradition for the tech-heavy, IPO-error prone index: next Friday, December 14, the NASDAQ will announce the official full list of new entrants and exit-ants from the index, which will take place on December 21, which usually serves as a technical buying boost for the new members, while those companies kicked out see substantial selling pressure as index funds no longer have to own the names. Below we present an analysis by Deutsche Bank's Bo Huang who lists, in order of conviction the names most likely to benefit (additions), and be punished (removals), from the reconstitution.
The names likely most likely to benefit: Kraft Foods, Regeneron, Libery Media, Analog Devices, Catamaran and Equinix. On the other hand, those holding Netflix, Apollo Group, Warner Chilcott, Green Mountain Coffee, Electronic Arts, Flextronics, or the recent Lazarus, until a month ago left for dead, Research in Motion, may want to quietly sell their holdings. They will likely have a better re-entry point after next Friday's announcement and prompt reallocation.
This year, we anticipate 8 pairs of Additions to and Deletions from the NASDAQ-100 index.
8 Additions: KRFT, REGN, LMCA, ADI, CTRX, EQIX, LBTYA, DISCA
8 Deletions: APOL, WCRX, GMCR, EA, FLEX, RIMM, NFLX, MRVL
Furthermore, we also present 3 pairs of possible, low conviction Additions and Deletions. As these Deletion companies are right on the boundaries of the NASDAQ-100 ranking methodology cut-offs, they could either remain in the index or be deleted and replaced.
3 Low Conviction Additions: VRSK, SBAC, WDC
3 Low Conviction Deletions: VRSN, LRCX, XRAY
Please see Figures 1 and 2 within for our index impact estimates and more details.
NASDAQ will announce the official changes next Friday, December 14 and implement them the following Friday, December 21. We will publish an official analysis following the announcement.
- 12-05-12, 04:18 PM #2
Deutsche Bank......hmm weren't these the same idi0ts who kept buying American mortgage bonds when everyone and their donkey came to know they were junk. If it's all the same, I will not take any advice from these guys.
- 12-05-12, 04:33 PM #5
For those in the US you might want to rethink your criticisms in-light of the mortgage fraud committed by AIG, Goldman Sachs, Morgan Stanley, et al. The executives of these "investment" banks should have been charged with fraud and convicted in a court of law and had all their personal and corporate assets seized.
- 12-05-12, 04:37 PM #6
- CrackBerry Abuser
12-05-12, 05:43 PM #10
- 381 Posts
The rule is pretty much the largest 100 nasdaq listed stocks by market cap. RIMs market cap has plummeted and after the next rebalance period RIM may be excluded. It is important to know this because people who own mutual funds or ETF that mimic the Nasdaq 100 will effectively be selling the stock if this happens.
- CrackBerry Abuser
12-05-12, 05:49 PM #11
- 361 Posts
According to some studies I've read, the deletion of a stock from an index has no long term effect on its share price. There is usually a noticeable drop in price from between the announcement date and the effective date. However, this is typically offset by a similar increase in price soon after the effective date.
If this prediction comes true, it may offer a short-term trading opportunity, although the December 20th earnings announcement may make things particularly volatile as well.
- CrackBerry Abuser
12-05-12, 05:53 PM #12
- 361 Posts
Here's one of the studies - http://www.finance.pamplin.vt.edu/ne...ceresponse.pdf
It deals with the S&P 500, but I'd assume the effect for other indexes would be similar.
"In this paper, consistent with prior work, we find a permanent price increase for firms added to the S&P 500 index. On the other hand, we find that firms deleted from the index do not experience a permanent negative price effect. Initially, the firms deleted from the index lose value, but that loss is recouped in the three months following the deletion. The absence of a permanent price effect for deletions is robust to different methods of computing excess returns."
I posted the article because I know there are people who trade a lot of RIMM and I thought it may be a good long term buy or short term sell. Not because I "went looking" for something bad to say. Paranoid much. It's all a big conspiracy right?
I thought it could be appealing because i would expect a considerable increase after 10 is released. That a positive thought. Ridiculous that everyone assumes the worst.
- CrackBerry Abuser
12-05-12, 06:14 PM #14
- 409 Posts
I wouldn't be surprised if it was delisted. I'm a shareholder, and obviously I would rather it not be delisted...but in reality, the stock has plummeted from it's glory days to what it is at now. Maybe one day in the future it will get relisted but I'm not going to be surprised if it is removed.
- 12-06-12, 08:22 AM #17
Anyway its a big deal but perhaps no real effect. Based on market cap the index lists the largest 100 NASDAQ listed companies. NASDAQ takes into account fluctuating market conditions when making these decisions however it is reasonable to expect time for RIMM to bounce back tomorrow. I don't see a big problem, index options are being sold by Funds and (some) investment banks seem likely to buy. If BB continues to manage expectations well, the share price should reflect that - hopefully in the upward direction!
- 12-06-12, 08:25 AM #18
- 12-06-12, 08:41 AM #19
- CrackBerry Genius of Geniuses
12-06-12, 08:46 AM #20
- 5,369 Posts
kindly note how everyone that was up in arms over wanting a netflix app have nothing to say on them possibly dropping from the 100.
People are at least talking about RIM which means they still care, however nobody seems to be talking about netflix. says it all for me.
- CrackBerry Genius
12-06-12, 08:49 AM #21
- 2,300 Posts
Seems there are a lot of skinned skinned users out there.,... it is a case of look at the source in general... Whenever you see anything put out by a financial outfit.... it tends to be very self serving..... As it is a prediction,.,,, why do people get so upset by it.... Remember to look outside as if you beliieve in the Dec 21 end of the world crowd... we should be able to see the planet Nirubu heading our way to collide with us.... If RIM is delisted, that is the time to put energy into this convesation.... all these threads do is perpetuate the death of RIM.... so why bother give it energy.....
- 12-06-12, 10:08 AM #23
As long as you guys can discuss it civilly, I see no reason to close the thread. Like I said you ARE free to ignore it.
The undeniable truth is that RIM or (RIMM if you will) is hurting right now, and stuff like this will happen, and it will get reported. We can discuss these things, we SHOULD discuss these things! But we need to be reasonable with each other and have some class, and follow the CrackBerry.com rules. They do NOT say you can't disagree, just don't be disagreeable when you do it.
And hopefully (and I believe it will) the release of BB10 will be the start of a big turn around at RIM.
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