Tracking Stock

AAA

DEFINITION of 'Tracking Stock'

1. Common stock issued by a parent company that tracks the performance of a particular division without having claim on the assets of the division or the parent company. Also known as "designer stock".

2. A type of security specifically designed to mirror the performance of a larger index.

INVESTOPEDIA EXPLAINS 'Tracking Stock'

1. When a parent company issues a tracking stock, all revenues and expenses of the applicable division are separated from the parent company's financial statements and bound to the tracking stock. Oftentimes, this is done to separate a subsidiary's high-growth division from a larger parent company that is presenting losses. The parent company and its shareholders, however, still control the operations of the subsidiary.

2. The most popular tracking stock is the QQQQ, which is an exchange-traded fund that mirrors the returns of the Nasdaq 100 index. Another type of tracking stock is Standard & Poor's depository receipts (SPDRs), which mirror the returns of the S&P 500 index.

RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. QQQQ

    The previous ticker symbol for the Nasdaq 100 Trust, an ETF that ...
  3. Carve-Out

    The partial divestiture of a business unit. A company undertaking ...
  4. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  5. Parent Company

    A company that controls other companies by owning an influential ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
RELATED FAQS
  1. What is a spider and why should I buy one?

    The term spider is the commonly-used expression to describe the the Standard & Poor's Depository Receipt (SPDR). This ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Modernize Your Portfolio With ETF Futures

    Gain access to premier, highly liquid ETFs with lower capital requirements.
  2. Mutual Funds & ETFs

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  3. Investing

    How To Invest Outside Your Comfort Zone?

    Sometimes, when it comes to investing, we have to step outside of our comfort zone and use investment tools to express a market view or specific outcome.
  4. Mutual Funds & ETFs

    How To Choose The Right ETF?

    Choosing the right ETF really isn’t that complicated. If you stay focused on a few key areas, you may find the experience to be much easier.
  5. Chart Advisor

    ChartAdvisor for March 27 2015

    A weekly technical summary of the major U.S. indexes.
  6. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  7. Mutual Funds & ETFs

    Want to Go Long Natural Gas? Eye the UGAZ ETN

    Is UGAZ the best way to play natural gas? Maybe not.
  8. Mutual Funds & ETFs

    How ETF Arbitrage Works

    ETF arbitrage brings the market price of ETFs back in line with net asset values when divergence happens. But how does ETF arbitrage work?
  9. Mutual Funds & ETFs

    Want Emerging Market REIT Exposure? Eye These ETFs

    It's possible (and easy) to invest in emerging market real estate from the United States — just look at these REIT ETFs.
  10. Mutual Funds & ETFs

    Should the YYY ETF Be on Your Radar?

    Why you should, or shouldn't, invest in YYY.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center