Why does Vanguard Total Stock include so little Uber?

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johnanglemen
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Why does Vanguard Total Stock include so little Uber?

Post by johnanglemen » Wed Jan 08, 2020 1:43 pm

I am surprised to find that neither Uber nor Lyft are part of Vanguard Total Stock's holdings (https://investor.vanguard.com/mutual-fu ... o-holdings).

Granted that link was last updated November 30th, so maybe they've been purchased since. But Lyft had been public for 8 months by then, and Uber for 6 months. How long does it take for Vanguard index funds to incorporate these new companies?

(Updated -- see below)
Last edited by johnanglemen on Thu Jan 09, 2020 3:29 pm, edited 2 times in total.

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johnanglemen
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by johnanglemen » Wed Jan 08, 2020 1:49 pm

Actually I found Lyft many pages deep, which makes sense since its valuation is only $13B. But Uber is not on the list.

HawkeyePierce
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by HawkeyePierce » Wed Jan 08, 2020 1:49 pm

I see Uber in there with holdings of $142,621,266 and Lyft at $270,094,430.

rhoms33
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by rhoms33 » Wed Jan 08, 2020 1:50 pm

They are both there. Sort by holding name.

snailderby
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by snailderby » Wed Jan 08, 2020 1:51 pm

HawkeyePierce wrote:
Wed Jan 08, 2020 1:49 pm
I see Uber in there with holdings of $142,621,266 and Lyft at $270,094,430.
Sure enough!
Last edited by snailderby on Wed Jan 08, 2020 2:04 pm, edited 1 time in total.

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johnanglemen
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by johnanglemen » Wed Jan 08, 2020 1:53 pm

Why were the Uber holdings so low 6 months after IPO, when it had a valuation of approximately $50 billion?

deltaneutral83
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by deltaneutral83 » Wed Jan 08, 2020 1:54 pm

Ultimately I am not sure how it works but Lyft has a market cap of $14B and the last few companies in the S&P 500 come in at $10B and makes up just at 1/100 of a % so Lyft looks tobe be just over 4/100 of 1% of the S&P if it were done strictly by market cap which I do not believe that it is done that way. Uber looks to have a market cap in the 50's in terms of billions so it would probably be more in the 8/100 of 1% of the S&P. Adding them together and you'd still be under 1/8 of 1% of the overall S&P I think.
Last edited by deltaneutral83 on Wed Jan 08, 2020 1:54 pm, edited 1 time in total.

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johnanglemen
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by johnanglemen » Wed Jan 08, 2020 1:56 pm

deltaneutral83 wrote:
Wed Jan 08, 2020 1:54 pm
Ultimately I am not sure how it works but Lyft has a market cap of $14B and the last few companies in the S&P 500 come in at $10B and makes up just at 1/100 of a % so Lyft looks tobe be just over 4/100 of 1% of the S&P if it were done strictly by market cap which I do not believe that it is done that way. Uber looks to have a market cap in the 50's in terms of billions so it would probably be more in the 8/100 of 1% of the S&P. Adding them together and you'd still be under 1/8 of 1% of the overall S&P I think.
But even just relative to the size of Lyft, the Uber holding should've been 4x as large at the end of November. Does it really take so long for the index funds to ramp up their holdings? Again that was over six months after Uber's IPO by that point.

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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by HawkeyePierce » Wed Jan 08, 2020 1:58 pm

johnanglemen wrote:
Wed Jan 08, 2020 1:53 pm
Why were the Uber holdings so low 6 months after IPO, when it had a valuation of approximately $50 billion?
I haven't looked at this one specifically but the CRSP index used by this fund excludes certain share types, which I suspect comes in to play with these companies.

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johnanglemen
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by johnanglemen » Wed Jan 08, 2020 2:00 pm

HawkeyePierce wrote:
Wed Jan 08, 2020 1:58 pm
johnanglemen wrote:
Wed Jan 08, 2020 1:53 pm
Why were the Uber holdings so low 6 months after IPO, when it had a valuation of approximately $50 billion?
I haven't looked at this one specifically but the CRSP index used by this fund excludes certain share types, which I suspect comes in to play with these companies.
Uber isn't a dual-share company or anything like that :confused

rkhusky
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Re: Why does Vanguard Total Stock include so little Uber?

Post by rkhusky » Wed Jan 08, 2020 5:19 pm

I imagine that the indexes add these companies slowly and randomly to prevent front-running and thrashing and for tax efficiency.

brad.clarkston
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Re: Why does Vanguard Total Stock include so little Uber?

Post by brad.clarkston » Wed Jan 08, 2020 5:28 pm

1.) I'm not sure I would want Uber and Lift being very heavy in the fund.
2.) There not anywhere close to being two of the largest companies in the US there current weights look about right.

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johnanglemen
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Re: Why does Vanguard Total Stock include so little Uber?

Post by johnanglemen » Thu Jan 09, 2020 3:29 pm

brad.clarkston wrote:
Wed Jan 08, 2020 5:28 pm
1.) I'm not sure I would want Uber and Lift being very heavy in the fund.
Then you're looking for an active fund.
brad.clarkston wrote:
Wed Jan 08, 2020 5:28 pm
2.) There not anywhere close to being two of the largest companies in the US there current weights look about right.
The mere fact that Uber had smaller representation in the fund than Lyft on November 30, 2019 demonstrates that this is not correct.

quantAndHold
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Re: Why does Vanguard Total Stock include so little Uber?

Post by quantAndHold » Thu Jan 09, 2020 4:10 pm

This is back of he envelope math.

Uber’s market cap is $57B
Market cap of the US market is $30T, so Uber is 0.19% of that.
TSM net assets is $140B. 0.19% of that is $266M.

So it looks like Uber is underrepresented and Lyft overrepresented. Given the minuscule allocation, though, it seems doubtful that it will skew returns.

I’m guessing they have some algorithm running that builds up a position over time to avoid having their trades move the market. Apparently TSM holds 0.5% of the market. Buying 0.5% of any stock in a short period of time would move the price. More than six months to make the purchase might be excessive, but they would have more experience at this than I do.
Yes, I’m really that pedantic.

JustinR
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Re: Why does Vanguard Total Stock include so little Uber?

Post by JustinR » Thu Jan 09, 2020 4:15 pm

Schwab TSM (SWTSX) is the same thing:
UBER 0.02% - $2,073,095.20
LYFT 0.03% - $3,299,586.68

VTSAX:
UBER 0.02% - $142,621,265.60
LYFT 0.03% - $270,094,430.36

123
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Re: Why does Vanguard Total Stock include so little Uber?

Post by 123 » Thu Jan 09, 2020 4:20 pm

If Uber and/or Lyft become dominant in the TSM I think I would dump the fund. A little new and crazy is okay, a lot - not so much.
The closest helping hand is at the end of your own arm.

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anon_investor
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Re: Why does Vanguard Total Stock include so little Uber?

Post by anon_investor » Thu Jan 09, 2020 4:21 pm

quantAndHold wrote:
Thu Jan 09, 2020 4:10 pm
This is back of he envelope math.

Uber’s market cap is $57B
Market cap of the US market is $30T, so Uber is 0.19% of that.
TSM net assets is $140B. 0.19% of that is $266M.

So it looks like Uber is underrepresented and Lyft overrepresented. Given the minuscule allocation, though, it seems doubtful that it will skew returns.

I’m guessing they have some algorithm running that builds up a position over time to avoid having their trades move the market. Apparently TSM holds 0.5% of the market. Buying 0.5% of any stock in a short period of time would move the price. More than six months to make the purchase might be excessive, but they would have more experience at this than I do.
I think it's that, and also indexes usually have a waiting period before an IPO is added to the index (I forget if it's 3 or 6 months), so that probably adds to the time it takes to build up a true market weight position of the stock in the index.

123
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Re: Why does Vanguard Total Stock include so little Uber?

Post by 123 » Thu Jan 09, 2020 4:26 pm

Note that the Vanguard Total Stock Market operates based on SAMPLING various characteristics to match the index. It does NOT hold complete proportional positions in a manner like an S&P 500 fund. With that noted I guess I can excuse it for holding Lyft and Uber.
The closest helping hand is at the end of your own arm.

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BeBH65
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Re: Why does Vanguard Total Stock include so little Uber?

Post by BeBH65 » Thu Jan 09, 2020 4:29 pm

Indexes are typically weighted on "free float" market cap, not "absolute" market cap.
Each index provider has its own interpretation.

Here is the one from MSCI: (p118)
MSCI global IMI methodology wrote:MSCI defines the free float of a security as the proportion of shares outstanding that
is deemed to be available for purchase in the public equity markets by international
investors. In practice, limitations on the investment opportunities available to
international institutional investors include:
Strategic and other non-free float shareholdings: [...]
Limits on share ownership for foreign investors: [...]
• [...]
Are all shares of Lyft and Uber available on the public equity markets? or are there certain restrictions?

ETA:
for Uber I find:
SHARES OUTSTANDING : 1.7B
PUBLIC FLOAT : 847.69M
For Lyft
SHARES OUTSTANDING : 277.83M
PUBLIC FLOAT : 199.07M
Last edited by BeBH65 on Thu Jan 09, 2020 4:33 pm, edited 1 time in total.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

Northern Flicker
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Re: Vanguard Total Stock doesn't include Uber or Lyft?

Post by Northern Flicker » Thu Jan 09, 2020 4:33 pm

johnanglemen wrote:
Wed Jan 08, 2020 1:53 pm
Why were the Uber holdings so low 6 months after IPO, when it had a valuation of approximately $50 billion?
Indices are float-adjusted so that weights are commensurate with liquidity. What percentage of the total shares were part of the IPO? How many more shares than that are in the free float?
Risk is not a guarantor of return.

brad.clarkston
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Re: Why does Vanguard Total Stock include so little Uber?

Post by brad.clarkston » Thu Jan 09, 2020 6:02 pm

johnanglemen wrote:
Thu Jan 09, 2020 3:29 pm
brad.clarkston wrote:
Wed Jan 08, 2020 5:28 pm
1.) I'm not sure I would want Uber and Lift being very heavy in the fund.
Then you're looking for an active fund.
brad.clarkston wrote:
Wed Jan 08, 2020 5:28 pm
2.) There not anywhere close to being two of the largest companies in the US there current weights look about right.
The mere fact that Uber had smaller representation in the fund than Lyft on November 30, 2019 demonstrates that this is not correct.

The fund is weighted by the market our opinion doesn't matte unless you want to start your own fund.
Where in this conversation did anyone mention active funds?


Have a nice day tho, this conversation doesn't really merit further thought or heartache on anyone's part.

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