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Facebook Won’t See a Bounce From Joining the Nasdaq-100

Wondering whether Facebook (NASDAQ:FB) stock will see a pop when it is added to the Nasdaq-100 Index on Dec. 12?

Allow me to answer that question based on the historical data: There’s a very good chance it will not.

If anything, joining the NDX could mean declines for Facebook stock.

I looked at a list of recent Nasdaq-100 additions — 18 changes in the last two years, not including Kraft, which recently split — and the lion’s share of the picks have underperformed the market since joining the index.

Here are the highlights:

A Handful of High Fliers: Pharma player Alexion (NASDAQ:ALXN) and organic grocer Whole Foods (NASDAQ:WFM) have blown up since joining the Nasdaq-100, trouncing the index more than four times over. Also of note is discounter Dollar Tree (NASDAQ:DLTR), which has doubled the NDX since it joined the benchmark.

But That’s the Exception: Unfortunately, beyond these three stocks, only a handful of other picks have outperformed. Electronics stock Avago (NASDAQ:AVGO), satellite radio stock Sirius XM (NASDAQ:SIRI) and media mogul Viacom (NASDAQ:VIAB) are the only other ones that beat the index, even marginally.

A Majority Underperform: Simple math means that 12 of 18 stocks failed to beat the market. Some only lagged marginally, such as semiconductor stock Texas Instruments (NASDAQ:TXN), which is off 5% since joining earlier this year vs. a flat NDX. But some are pretty ugly.

The Worst Underperformers Are Quite Ugly: And of course it’s worth noting that to offset the three high fliers, there are twice as many stocks that have lost 25% or more since joining the index — led by the horrible returns of -56% in Chinese travel site Ctrip.com (NASDAQ:CTRP), -53% in streaming video provider Netflix (NASDAQ:NFLX) and -49% in Keurig company Green Mountain (NASDAQ:GMCR). When you consider that Netflix and GMCR both have rallied dramatically in recent weeks to “improve” their returns, it is even more disturbing how much recent additions can flop.

Past performance is no guarantee of future returns, as the old saying goes. But those expecting a big bounce for Facebook simply due to news it will join the NDX in the coming days should keep this track record in mind.

Related Reading

  • Jeff Uscher says $7.50 is fair for Facebook stock — a roughly 70% crash. (Money Morning)
  • Are shares safe now that the lockup is past? (Wall Street Cheat Sheet)
  • Options guru Ken Trester “likes” Facebook. (24/7 Trader via InvestorPlace)

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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