Mr. Sensitive

June 29, 2010

FSX Component Changes – Q3 Announcement

Filed under: FSX — lbej @ 15:41

I’ve made my final decisions for inclusion in the Family Stock Index in Q3, but I want to provide a little background first.  I have already explained what I’m looking for in a company name or stock ticker when I pick components for the Family Stock Index.  I want to take this opportunity to list some of the trading characteristics I look for in the stock itself.

  • Average daily trading volume in excess of 100 thousand shares.  I shy away from stocks that are very thinly traded because they are volatile on the days they do move and boring on the days they don’t.  I removed BRTHY for that reason and JDOG suffers the same fate now.
  • Market capitalization greater than $100 million but less than $10 billion.  These stocks tend to trade as reliably as the headline names, but they have less analyst and financial media exposure.  As a result I find myself less annoyed by them than I am by more popular stocks.
  • Stock price greater than $1.  Stocks trading below $5 are known as penny stocks and are subject to different brokerage requirements and market dynamics.  Stocks trading below $1 are like halfpenny stocks and they can be delisted from the NYSE if they traded there to begin with.  I actually like having a stock below $5 in the index; I get extra drama with the way those things trade.  Stocks below $1 are another matter altogether, and I prefer to avoid them.

Now onto the changes:

  • Icarus will now be represented by Empresas ICA, the second-largest construction company in Mexico.  The company is known by the name ICA and trades on the NYSE under that ticker symbol.  ICA has 161 million shares outstanding and market capitalization of approximately $1.5 billion.   It trades near the high end of its $11.00-$5.75 52-week range.  I’d love to have kept JDOG, but it’s a three- to five-cent stock, and I was frankly being unrealistic keeping it in the FSX as long as I did.
  • The Nicoles have thus far shared a common market destiny, represented by the offensive (to me) ticker NICE.  My replacement for NICE—or rather, replacements—have been chosen so as to recognize the unity of the past while sundering Nicoletic destinies for the future.  Thus I will be using NiSource and Rockwell Collins, with the ticker symbols NI and COL.  As for which Nicole gets which part of NICOL, I broke it down by industry.  NiSource is all about gas distribution, and I have known Justin’s Nicole to be about that as well, so NI will go to her.  Mario’s Nicole gets COL because her surname sounds like a Roman general and Rockwell Collins is a defense contractor.  The market stats are as follows:  NI has 277 million shares outstanding and a market cap of $4.1 billion, trading near the middle of a 52-week range of $16.80-$11.41; and COL has 157 million shares outstanding and a market cap of $8.5 billion, trading in the upper half of a 52-week range of $68-$38.
  • ZERO was the last component I had figured on swapping out, but now that it comes to it, I don’t want to.  ZERO stays in, because it had a miserable 2nd quarter and I’m not the kind of guy to kick somebody when he’s down.  Or a stock, anyway.  I’ll kick a dude.
  • Instead of Zero, I’m switching it up on Katie.  I was going to stick with KT Corp for her, but its market capitalization in excess of $10 billion and its location on the unstable Korean peninsula ultimately led me to make a change.  Instead I will be going with Cathay General Bancorp, parent of western U.S. commercial bank Cathay Bank.  Cathay traditionally caters to the Chinese-American community in California and is thus an interesting play on both demographic trends and the financial services business more broadly.  The ticker symbol is CATY, which if pronounced cat-ee, is what I call the Empress much of the time.  Once we were at Fuddruckers (R.I.P.) and Katie had given her name as, not surprisingly, Katie, but when they announced our order was ready they said cat-ee.  Because Katie is such an unusual name, I suppose.  So I thought that was excellent, and it seemed to be both irritating and amusing to Katie, much as I am both irritating and amusing to her.  I stuck with cat-ee and there’s nothing anyone could do about it because that’s what I’m like.  CATY has 78.5 million shares outstanding and a market cap just north of $800 million.  It’s trading right smack in the middle of its 52-week range, $15 to just under $7.

So that’s it.  KT, NICE, and JDOG are out, and CATY, NI, COL, and ICA are in.  Changes will take effect July 1st.

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5 Comments »

  1. This is still my favorite feature on the blog. I’m pretty sure I’m the only person (besides you, Lee) who actually gets excited to read the FSX report each week.

    Comment by Mario — June 30, 2010 @ 09:14 | Reply

    • I aim to please. I tried to explain how the FSX works to your Dad while he was visiting but I’m not sure I quite bridged the chasm. It fascinates him but it remains inscrutable, like a well-done magic trick. Also, he kept calling it the Family Stock Exchange. I would say index, he would repeat exchange. While it would be helpful from a mark-to-market accounting standpoint, I don’t actually trade members of family. That’s not to say I wouldn’t, but I believe that sort of thing is frowned upon outside of Eastern Europe.

      Comment by lbej — June 30, 2010 @ 09:46 | Reply

  2. I think that could be a future blog post … The Family Stock Exchange. I like it. Also, can my stock be Nintendo at the next reshuffling? Is Nintendo publicly traded?

    Comment by Mario — June 30, 2010 @ 11:41 | Reply

    • Can’t get enough of the Japanese companies? I would have thought BRTHY would have slaked the thirst. What is it about Nintendo that makes it a good match for you? I can’t see including NTDOY (primary listing is 7974 on the Tokyo Stock Exchange) because the ADRs are thinly traded and its $38 billion market value is well beyond the $10 billion max I prefer, but I’m interested to hear your reasoning. I am considering an alternative FSX that incorporates stocks listed on foreign exchanges (London, Tokyo, Frankfurt, Hong Kong, Paris, and so forth)–I would call it the FFSX, naturally. It would get time-intensive because I would be using the liquid primary listings rather than illiquid ADRs and that would mean at least four more currencies.

      Comment by lbej — June 30, 2010 @ 14:40 | Reply

  3. Nintendo = Super Mario.

    Comment by Mario — July 1, 2010 @ 14:48 | Reply


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