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Sell The Shovels (At Wal-Mart) There's an old saying in investing: When there's a gold rush, it's not the prospectors that get rich; it's the folks selling the picks and the shovels. That same thinking applies to the new ISE-Revere Wal-Mart Supplier Index (ticker: WMX), launched in December by the International Securities Exchange (ISE) and Revere Data LLC. The index tracks the performance of companies that derive a significant portion of their revenues from supplying Wal-Mart. According to Bruce Goldberg, ISE's chief marketing officer, investors have been worried about Wal-Mart's aggressive expansion and what that means for profits; but for suppliers, it's only good news. That plays out in the index: Since July 2002, the WMX index is up over 40 percent, while Wal-Mart shares are down 15 percent. Creating the index involved a neat bit of data mining from Revere, which previously paired with ISE to launch a natural gas index in October. The index reads like a who's who list of major American companies, and in many cases, the percentage of revenues tied to Wal-Mart is incredible. A few examples of the 30 components are listed here, with the percentage of revenue tied to Wal-Mart in parentheses.
ISE plans to launch options tied to the index soon. Options Volume Soars The options industry celebrated another record year in 2005, with total industry volume rising 35 percent over 2005's record numbers, according to the Options Industry Council. All told, over 2 billion contracts traded hands, with the top 10 volume days in history all occurring last year. Index and ETF options played a key role in the growth. At the Chicago Board Options Exchange, for instance, total index and ETF options volume grew by 48 percent over year-ago levels, with many contracts setting new annual trading records. ETF options sported the highest growth, at 65 percent, which is interesting considering that there is more competition in the ETF option listing space than in any other options market. |
