The utility was enjoying a double-digit gain, but not because of any proprietary news.
Hawaiian Electric Industries (HE +10.80%) was providing plenty of financial juice to its shareholders on Monday. Following news that the utility stock is set to be included in a key equity index, market players rushed to buy it, driving the price up by 11% in mid-afternoon trading.
Graduation day
Just after market close last Friday, S&P Global Indices — the company behind such closely followed stock market gauges as the S&P 500 index — announced adjustments to several of its indexes. As part of its latest quarterly rebalancing effort, Hawaiian Electric will become a component stock of the S&P SmallCap 600 Index.
Image source: Getty Images.
All told, 14 stocks (including Hawaiian Electric) were added to the index, while 13 were deleted. Among the other titles that are to join the lineup are travel stock Marriott Vacations Worldwide and healthcare company Perrigo.
All of S&P Global’s adjustments this cycle (which include several changes to the S&P 500 index) will take effect prior to the start of trading on Monday, Dec. 22.
Hawaiian Electric Industries
Today’s Change
(10.80%) $1.22
Current Price
$12.46
Key Data Points
Market Cap
$2B
Day’s Range
$11.75 – $12.69
52wk Range
$8.14 – $13.41
Volume
6.9M
Avg Vol
1.8M
Gross Margin
7.20%
Dividend Yield
N/A
Index effect incoming
This is only the latest example of the vaunted “index effect” that can impact stocks after such announcements are made. Hawaiian Electric’s shares will surely benefit from ascension to the S&P SmallCap 600, as it will be up for consideration by the many index funds that trawl these lineups. However, inclusion on an index changes very little, if anything, about a company’s fundamentals.
Given that, investors shouldn’t buy or sell Hawaiian Electric on the basis of its joining its new club.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
