Index changes can trigger short-term moves. When a company is added to a major benchmark, index-tracking ETFs and mutual funds may have to buy the shares to match the revised index.
Conversely, removals or demotions can prompt passive funds to sell.
Stephens' estimated passive-impact analysis suggests that several potential S&P 500 additions could attract buying demand of tens of millions of shares from index-tracking funds.
Potential additions and demotions
For the S&P 500 inclusion, Stephens' top candidates include Bloom EnergyBE.N in industrials, Cheniere EnergyLNG.N in energy, and for the technology sector it suggests Astera LabsALAB.O, Credo TechnologyCRDO.O and TwilioTWLO.N.
Healthcare candidates include Royalty PharmaRPRX.O, Alnylam PharmaceuticalsALNY.O and Illumina . Other names on its watchlist include , , and .
Stephens flags The Trade DeskTTD.O, Builders FirstSourceBLDR.N, Norwegian Cruise LineNCLH.N, Molson CoorsTAP.N and MosaicMOS.N as potential S&P 500 demotion candidates.
MidCap 400 and SmallCap 600 watchlist
For the S&P MidCap 400 insertion, names to watch include HubSpotHUBS.N, Corcept TherapeuticsCORT.O, GlaukosGKOS.N, PopularBPOP.O and Oscar HealthOSCR.O.
Potential S&P SmallCap 600 additions include PACS GroupPACS.N, CCC Intelligent SolutionsCCC.O, WorkivaWK.N, FreshworksFRSH.O, Arcutis BiotherapeuticsARQT.O, PaymentusPAY.N and UpstartUPST.O.
Stephens has identified a watchlist of companies that could be added to, moved between, or removed from S&P Dow Jones Indices when the index provider announces its third-quarter rebalance after the market closes on Friday, September 18.
The brokerage expects discretionary changes to be more likely this quarter.
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