Hacker News Reader

Comment by redox99 | Hacker News Reader

I assume joining the SP500 means an almost automatic price jump, since its shares will be purchased by ETFs that track that index?

View on HN

If this were surprise news maybe, but this is the type of news that is priced in slowly over time and somewhat expected. Basically when sophisticated people bought uber a year ago one of the drivers of a higher price was the assumption it might be included in the S&P500.

A lot of things in finance and markets are self fulfilling prophecies like this, for example just look at the fed. They are the classic example of expectations > action.

There’s still a jump proportional to how unexpected it was by the market as the bets are settled, so to speak. Until it’s announced, there’s some contingency that thinks it won’t happen and is putting downward pressure on the stock. Eyeballing the small jump here hints that it was a small contingency.

I wish there would be a way to just buy sp500 minus a list of firms, so I could invest in a diversified way without going into Uber and friends (or any other firms that make profits on paper without the cash flow to back it)

Most trading APIs are fairly simple, TD for example is very easy to use and very accessible. IBKR is a bit weirder in both protocol and access, but, works very well.

You can pretty trivially DIY that.

https://pebble.finance/

(Disclosure: The CEO is an acquaintance, but I have no financial interest.)

So buy SPY and short Uber?

Can you do this easily? Without paying $$ in transaction costs due to shorting (plus margin)

There's at least one ETF that tracks the top 50.

Fractional shares would work, if you don't want the expense and unreliability of shorting.

Simplest thing would be to find an actively-managed mutual fund that focuses on what you want. (Warning: What you want is probably to lose money compared to the rest of the market.)

> firms that make profits on paper without the cash flow to back it

Uber is cash-flow positive [1].

Due to stock-based compensation, many profitable tech firms hit this metric before GAAP. Put another way, if you owned the entire business, you could sustainably extract those profits.

[1] https://s23.q4cdn.com/407969754/files/doc_earnings/2023/q3/e...

Be careful. The indexers might hear this and reassure you that the S&P is only optimal with Uber included at exactly the date it did and the fund will fail otherwise.

You can do this with most direct indexing solutions.

Reply on news.ycombinator.com