Should You Buy Dell and Palantir Now?

I hope you’re having a fantastic day! I wanted to drop a quick note about something I’ve been getting a lot of questions about lately—Dell and Palantir. And also I have a special deal for you at the end of the email.

You’ve probably heard the buzz: Dell and Palantir were just added to the S&P 500 last Friday. Naturally, this has led many to wonder if now’s the time to jump in and buy. But before you get too excited, let me share a few thoughts.

First, the initial reaction might be to assume that the stock prices for Dell and Palantir are going to soar now that they’ve been included in this prestigious index. It’s easy to think this is a no-brainer opportunity, but history suggests otherwise.

The S&P 500 Index Effect

There have been numerous studies on what happens to stocks after they’re added to the S&P 500, and the results are pretty telling. One comprehensive study looked at over 500 companies that were added to the index, and the findings might surprise you.

Initially, stocks often experience a price bump leading up to their inclusion—likely due to strong fundamentals that got them noticed in the first place. But what happens after they join the S&P 500? Well, let’s just say it’s not as rosy as you might hope.

A paper from SP Global suggested that in the last 10 years (the part in yellow), the Index Effect has dimmished in recent years.

Let’s take a few examples:

- Uber was added in December 2023. The stock saw a quick rise but didn’t hold up for long. It’s too early to draw final conclusions, but the initial excitement faded fast.

- Tesla joined the index in December 2020, and while it saw a sharp increase at first, the stock later plateaued. If you had bought in at that time, you’d likely be sitting at break-even right now.

- Match Group, the company behind Tinder, was added in September 2021. Since then, the stock has been on a downward trend.

What Does This Mean for You?

So, what’s the takeaway here? The evidence suggests that there’s no lasting value effect from being added to the S&P 500. In other words, just because a stock is added to the index doesn’t mean it’s going to perform well in the long term.

If you’re considering buying Dell or Palantir solely because they’ve been added to the S&P 500, it might be wise to think again. Instead, focus on whether you believe these companies are fundamentally strong and undervalued based on their own merits.

And remember, when it comes to investing, your portfolio size doesn’t matter nearly as much as your position sizing. Always invest in a way that allows you to be wrong without it hurting you too much. It’s all about smart, informed decisions, not chasing the hype.

I hope this gives you a clearer perspective.

9.9 Promotion

And if you want to take a look at fundamentally strong businesses, you can check out Stock Market Genius, where I share my EXACT investments and trades and many more.

For example, during our recent Visa trade, our students netted more than $5000 in profits (even during last week’s downturn)

If you like to give it a go! Now we are running a 9.9 sale where you get complimentary trial for two weeks. If you don’t like it, cancel with no questions asked. If you like it, stay on with more than 500 investors!

This offer will last till end of 10 Sep! Grab it while it last.

Alright! This should get you ready for the markets this week!

May Your Profits Grow!

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.