Murphy Oil (MUR) is currently a member of the S&P 500 and will remain so even after the spinoff of its retail business, Murphy USA. The new company will end up a little further down the chain though and will replace Strayer Education (STRA) in the S&P MidCap 400 index upon completion of the spin. Strayer will be booted to the S&P Small Cap 600 as the company’s market cap is ‘more representative of the small cap market space’. As the final piece of this puzzle, poor STR Holdings (STRI) will get dropped from the S&P Small Cap 600 entirely as it was ranked #600. The spinoff and associated moves are expected to be completed on August 30, 2013 and Murphy USA will trade on the NYSE under the ticker ‘MUSA’.
In You Can Be A Stock Market Genius, Joel Greenblatt takes note of the ‘forced selling’ phenomenon often witnessed post spinoff. The smaller company often ends up in a different index than the parent (as is the case with Murphy) and as a result, institutional investors bound by investment mandates need to dump the shares. This can create artificial downward pressure on the prices and provide attractive entry prices. Depending on what is spun off, sometimes even the parent company will move as well. With the growth in ETFs and other benchmark-following investors, it’s important to at least monitor these changes and keep them in mind when considering entry.
Disclosure: Author holds no position in any stock mentioned.
Related articles
- Murphy USA Set to Join S&P MidCap 400; Strayer Education, Flotek Industries to Join S&P SmallCap 600 (sys-con.com)
- Murphy USA Spinoff Approved And Set For End Of August (stockspinoffs.com)
- Murphy Oil announces stock redistribution, appointment of new officials (arkansasonline.com)
- What Hedge Funds Think About Murphy Oil Corporation (MUR) (insidermonkey.com)
- Murphy Oil Corporation Approves Spin-Off of Murphy USA Inc. and Announces Regular Dividend (dailyfinance.com)
- Murphy USA Set to Join S&P MidCap 400; Strayer Education, Flotek Industries to Join S&P SmallCap 600 (sacbee.com)
Nice find, this could create a nice opportunity.
Out of interest where do you find out which stocks are planning on joining/leaving the indices?
Thanks. The operators of the index will issue press releases about any upcoming additions/deletions. In this instance, the relevant press release about from S&P about Murphy is linked to in the above article.
Additionally, I think there are some sites which track this information and if you have a data service like Bloomberg, you can find that info there as well. Index trading used to be a pretty popular strategy…it might even still be.
Today on 3 September MUSA is behaving strangely. My online broker doesn’t even list it. Google says MUSA is a metal company and still lists MUSA (the gasoline company) as “when issued”. However, both MUSA the metal company and MUSA-wi are trading at the same price. I’ve only come across two other people complaining about this. The online broker looked at it and said “that makes no sense”. So far there hasn’t been a sell off. The price is slightly up no matter which MUSA you look at. Just think it’s funny little guys like me can’t buy it right now.
That is weird. I was out most of the day yesterday and did not have a chance to check in on this, but it seems like I am able to buy MUSA (the Murphy spin) at my online brokerage today. In general, I find Google Finance takes some time to catch up to spinoffs – I remember the ALEX/MATX one was quoting the wrong price for quite some time!
According to the press release, it should have traded on Sept 3. Funny thing is the Murphy USA website doesn’t appear updated yet and it still describes itself as part of Murphy Oil.