CIBC says Fairfax is likely to be added to the S&P/TSX 60 in December 2024 - sell decisions

[dartmonkey]

20 hours ago, SafetyinNumbers said:

Is that just because of the number of companies in each of the 60 and the 500? Both are based on float, both have a committee decide if it should go in. The TSX 60 is not that different from the 60 biggest floats.

You are right and I was wrong. Comparing the top 60 from the TSX Comp versus the TSX 60, as you say, the big ones are the same so they end up being about as correlated as the top 500 in the USA compared to the S&P 500. In the case of the TSX 60, the top 30 are almost identical (Fairfax and Great West being exceptions), and that's where 80% of the value is. Although there are more differences in the bottom 30, many are still the same, so only about 10% of the total capitalization of the S&P TSX 60 is not in the top 60 of the TSX Comp, which is about the same ratio as the S&P 500 compared to the biggest 500 US firms.

[ValueNation]

Carney told Anglo American to move headquarters to Canada for Teck deal approval, sources say - The Globe and Mail

 

If this goes through, then would the TSX 60 spot automatically stay with Teck/Anglo, and redistribute the weightings to be more balanced? i.e. make it less overweight in financials. Ultimately may make FFH's inclusion more likely down the road, but not with this particular takeover.

[dartmonkey]

15 hours ago, ValueNation said:

Carney told Anglo American to move headquarters to Canada for Teck deal approval, sources say - The Globe and Mail

 

If this goes through, then would the TSX 60 spot automatically stay with Teck/Anglo, and redistribute the weightings to be more balanced? i.e. make it less overweight in financials. Ultimately may make FFH's inclusion more likely down the road, but not with this particular takeover.

That’s another possibility - I guess it depends how the committee defines  ‘domicile’ which they define as to “be domiciled or incorporated in Canada.” 

 

The proposition is for the head office and the chief executives to be in Vancouver, so that might be enough: “with its global headquarters located in Vancouver and corporate offices to support the global group in London and Johannesburg. With key leadership roles based in Canada, including Duncan Wanblad as CEO, Jonathan Price as Deputy CEO, and John Heasley as CFO, with Sheila Murray as Chair, …”

 

On the other hand, “Anglo Teck will remain domiciled in Britain and the primary stock listing will be the London Stock Exchange.” I dont know why that should be so important to the Canadian government, but maybe the government’s reaction is just for political points. I can’t see why Anglo American couldn’t sweeten the deal in what seems like a trivial way by redomiciling in Canada (whatever that means) but I am not a lawyer…

[ValueNation]

https://apple.news/A9nhS8eQJSO-TG6VDDUoXpA
 

Scotiabank is predicting that FFH gets added to S&P low-volatility index by Dec 12th. Not sure how significant that is, but I suspect some price-insensitive buying will be somewhat of a tailwind into the end of the year if it it does happen

[Hoodlum]

6 minutes ago, ValueNation said:

https://apple.news/A9nhS8eQJSO-TG6VDDUoXpA
 

Scotiabank is predicting that FFH gets added to S&P low-volatility index by Dec 12th. Not sure how significant that is, but I suspect some price-insensitive buying will be somewhat of a tailwind into the end of the year if it it does happen

Wouldn’t that need to be announced on the 5th after markets close?   That is the usual timing for TSX index changes.  And who would be removed?   

[Hoodlum]

Maybe CIBC is thinking the Teck acquisition shareholders vote on Dec 9th would trigger this.  But would the S&P do the index swap before the Canada government gives final approval for the Teck acquisition?  
 

Edited December 3, 2025 by Hoodlum

[ValueNation]

I think this article is referring to a sub-index - the Low-volatility index. Not sure there are a lot of ETFs that track it, so probably not a lot of extra buying if its added. Not like the TSX60, which has multiple large ETFs tied to it. It mentions Dec 12th in the article as the date it would be announced.

[SafetyinNumbers]

1 hour ago, ValueNation said:

I think this article is referring to a sub-index - the Low-volatility index. Not sure there are a lot of ETFs that track it, so probably not a lot of extra buying if its added. Not like the TSX60, which has multiple large ETFs tied to it. It mentions Dec 12th in the article as the date it would be announced.

I think it’s about 10k shares of buying for the low volatility index. 

[anshulp]

Its officially in 

[Hektor]

12 minutes ago, anshulp said:

Its officially in 

https://ca.finance.yahoo.com/news/p-dow-jones-indices-announces-221500876.html

[Hsmpanl]

12 minutes ago, anshulp said:

Its officially in 

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-and-s-amp-p-tsx-60-index-837277970.html

 

And yet the stock is selling off? Could be an interesting end to 2025/start of 2026.

[Hoodlum]

I wasn’t expecting that now.  I wonder what changed their mind from the past 12 months.  
 

Algonquin Power has gained 22% in the past 12 months, while Fairfax has gained only 14%.  Yet Algonquin Power was removed and Fairfax added now.  It almost seems like the the S&P want to wait a year before moving forward with a change. 

[MarioP]

1 hour ago, Hsmpanl said:

https://www.newswire.ca/news-releases/s-amp-p-dow-jones-indices-announces-changes-to-the-s-amp-p-tsx-composite-index-and-s-amp-p-tsx-60-index-837277970.html

 

And yet the stock is selling off? Could be an interesting end to 2025/start of 2026.

Lots of people think that index funds buy on the open market. Not for a major move like Fairfax inclusion. 
 

Exchange of stocks for units of index funds (ETFs)

Yes, there is indeed a very common (and perfectly legal) practice called in-kind creation/redemption or exchange of securities for ETF shares.

It is actually the main mechanism that allows large ETFs (SPY, VOO, QQQ, CAC 40 ETFs, etc.) to buy or sell hundreds of millions or billions of dollars/euros worth of stocks without causing massive price swings during index rebalances (such as additions to the S&P 500 or CAC 40).

How it works in practice

1.  Authorized Participants (APs)
These are major banks or brokers (Goldman Sachs, JPMorgan, Société Générale, Flow Traders, Jane Street, etc.).

2.  Creation Basket
Every day, the ETF issuer (BlackRock, Amundi, Vanguard, State Street, etc.) publishes the exact list of stocks (and quantities) that correspond to a fixed number of ETF units (e.g., 50,000 shares of a CAC 40 ETF).

3.  In-kind exchange

•  When the ETF needs to buy heavily a stock (e.g., Euronext added to the CAC 40 or Apollo added to the S&P 500), the AP:
→ Buys the stocks on the market (or takes them from its inventory),
→ Delivers this complete basket of stocks to the ETF,
→ In return, receives brand-new ETF units (creation units).

•  The opposite happens when a stock is removed from the index: the AP delivers ETF units and receives the basket containing the stock to be sold.

4.  Major advantages

•  No cash transactions on the secondary market → very little price impact.

•  Almost no taxable capital gains for the ETF (especially in the US – huge tax advantage).

•  Allows absorption of colossal volumes on rebalance day without driving prices crazy.

Real-world example: Euronext added to the CAC 40 (September 22, 2025)

•  CAC 40 ETFs had to buy ~€1.2 billion worth of Euronext shares.

•  A large portion of that volume did not go through the regular order book.

•  APs (Société Générale, BNP, Kepler, etc.) delivered Euronext shares (gradually accumulated beforehand) in exchange for millions of newly created ETF units.

•  Result: the demand shock on the effective day was heavily dampened.

 

This answer were produce by Grok when I tried to understand how index funds trade

Edited December 6, 2025 by MarioP

[djokovic1]

11 minutes ago, MarioP said:

Buys the stocks on the market (or takes them from its inventory),

Regardless in the example provided, the etf provider has to buy the shares in the open market

[MarioP]

Just now, djokovic1 said:

Regardless in the example provided, the etf provider has to buy the shares in the open market

Yes but they probably bought it months ago gradually. 
 

If you work at an AP you don’t work on FFH today. You begin to buy the next inclusion possible in 3 months

[Junior R]

19 minutes ago, MarioP said:

Yes but they probably bought it months ago gradually. 
 

If you work at an AP you don’t work on FFH today. You begin to buy the next inclusion possible in 3 months

but they have no prior knowledge it is getting added  so how would the AP buy it

[MarioP]

https://www.spglobal.com/spdji/en/methodology/article/sp-us-indices-methodology/
 

here you have every thing you need to have a good idea of who is next in  line. 
 

every body here known FFH was next for TSX

[SafetyinNumbers]

1 hour ago, Hoodlum said:

I wasn’t expecting that now.  I wonder what changed their mind from the past 12 months.  
 

Algonquin Power has gained 22% in the past 12 months, while Fairfax has gained only 14%.  Yet Algonquin Power was removed and Fairfax added now.  It almost seems like the the S&P want to wait a year before moving forward with a change. 

It’s based on the weighting not the performance. Algonquin is the smallest it’s been in 5 quarters by weight. Fairfax was still in the top 2 in the Completion index. 

[SafetyinNumbers]

8 minutes ago, MarioP said:

https://www.spglobal.com/spdji/en/methodology/article/sp-us-indices-methodology/
 

here you have every thing you need to have a good idea of who is next in  line. 
 

every body here known FFH was next for TSX

S&P/TSX 60 is committee based. Any pre buying was from index arbs and they have been “burned” 5 quarters in a row so chances are this was the least gamed quarter in the past 6. 

[djokovic1]

10 hours ago, Haryana said:

Not getting this discussion, the addition is on 22nd, there are full 2 weeks for adjustment. 

 

@MarioP is arguing that there will be no impact as traders have already front run the FFH inclusion and pre-bought. I agree with @SafetyinNumbers that that is an incorrect assessment. 

Because the FFH addition in the TSX60 is committee based as opposed to formulaically determined. And there is no way to know with certainty when it will be added, as we have seen over the past year (i.e it has met the size criteria for a while). So there is likely limited front-running this time given anyone who has tried to do it in the past has got burned and given up.

 

Should be a fun and interesting next 3 weeks.

Edited December 6, 2025 by djokovic1

[Hamburg Investor]

Yes, congrats to Prem, his team! What a journey!
 

I‘ve been sticking to FFH since 2013. And my feelings are mixed: It feels logical and right. How could this company stay overseen by Mr. Market forever? So price should go up now a bit or more.

 

But I am all in FFH with around 45% of my portfolio in FFH and am not planning to sell a share, even if it would triple tomorrow (Is a pe ratio of 23 too much for a company with a SAFE longterm 15+% ROE, maybe even 20%+ ROE over the next couple of years? I don‘t think so, but clearly that’s a point where one might find other opportunities…?!)

 

So the only way for me of getting a bigger share of FFH as a company would be buybacks. as I am not willing to put more eggs into one basket by selling other stuff, pay high taxes on that and buy more FFH. 

 

Still hoping for a low price in the future, as I like watching the share count shrinking over the years - but this index addition isn’t helping with that goal… 

[Xerxes]

12 hours ago, djokovic1 said:

Regardless in the example provided, the etf provider has to buy the shares in the open market

It is not so much the buying for indexing by the ETF providers that brings the buying pressure, I feel.
 

More the fact that active managers that going forward needs to own it. 
 

 

[MarioP]

1 hour ago, djokovic1 said:

 

@MarioP is arguing that there will be no impact as traders have already front run the FFH inclusion and pre-bought. I agree with @SafetyinNumbers that that is an 

I never said that. I think that there will be an impact but less important than some think. The ETF has to own it on dec 22 and I told that they will not buy a lot on that day and post a Grok text explaining why. 
 

I totally adhere to the line on thinking of @SafetyinNumbers about the longterm impact of beeing in an index. And I still try to figure out what will happen to the market as index investing grow at 2% clip

per year. Index investing doesn’t care about value. And I believe that will bring a disaster some day. 

[Hoodlum]

12 hours ago, SafetyinNumbers said:

S&P/TSX 60 is committee based. Any pre buying was from index arbs and they have been “burned” 5 quarters in a row so chances are this was the least gamed quarter in the past 6. 

Those analysts who recently lowered their targets for Fairfax were certainly caught off guard. 

[djokovic1]

56 minutes ago, Xerxes said:

It is not so much the buying for indexing by the ETF providers that brings the buying pressure, I feel.

I have seen index addition and deletions have huge short term impact on stock prices.