ETFs
ETFs Focus on Upcoming S&P 500 Shakeup
The popular S&P Dow Jones indices are set to adopt their usual new look this month. Each year on the third Friday in June, the S&P 500, S&P MidCap 400, and S&P SmallCap 600 indexes undergo rebalancing. This shake-up results in strong gains for stocks entering the indices.
Thus, ETFs targeting the S&P Dow Jones indices are currently the center of attention. These include SPDR S&P 500 ETF Trust TO SPY, iShares Core S&P 500 ETF IVV, Vanguard S&P 500 ETF VOO, iShares Core S&P Mid-Cap ETF IJH and iShares Core S&P Small Cap ETF IJR.
What’s in it and what’s not?
KKR & Co. Inc (KKR), CrowdStrike Holdings (CRWD) and GoDaddy Inc. (GDDY) will enter the S&P 500, replacing Robert Half Inc. (RHI), Comerica Inc. (CMA) and Illumina Inc. (ILMN ). The inclusion of new stocks in the S&P 500 is like a ticket to making them shine brighter. This will strengthen a company’s investor profile and increase its liquidity – two factors that can potentially boost its stock price. During the latest rebalance, Super Micro Computer (SMCI) hit an all-time high, shortly after joining the index in early March (read: More S&P 500 Rally in the Cards? ETFs to Win).
The inclusion of KKR highlights its extraordinary growth in recent years. The private investment firm outlined a plan to reach at least $1 trillion in assets under management within five years. The addition of CrowdStrike and GoDaddy to the S&P 500 will fuel substantial growth as investors look to capitalize on the growth of cloud computing and artificial intelligence.
CRWD has benefited from the growing demand for cybersecurity solutions amid growing data breaches. The continued focus on new product rollouts, acquisitions and partnerships is expected to continue to drive sales. The stock has more than doubled over the past year to become the second-highest performer in the tech-heavy Nasdaq 100 Index, behind NVIDIA (NVDA).
GDDY benefited from strong momentum in the Applications & Commerce activity. The strength of Create & Grow solutions contributes to revenue growth in the Application & Commerce segment. Additionally, booking growth, primarily driven by substantial guest additions and price increases in various areas, has been a key catalyst for the company.
Reshuffling of other indices
Illumina will also replace GoDaddy in the S&P MidCap 400. Robert Half and Comerica will replace Anywhere Real Estate (HOUS) and Adtran Holdings (ADTN), respectively in the S&P SmallCap 600.
Texas Pacific Land (TPL), BioMarin Pharmaceutical (BMRN), Warner Music (WMG), Nextracker (NXT), Altair Engineering (ALTR) and RB Global (RBA) will replace Werner Enterprises (WERN), Integra Lifesciences (IART), Penn Entertainment (PENN), Grocery Outlet (GO), Leggett & Platt (LEG) and Hertz Global (HTZ), respectively in the S&P MidCap 400. In the meantime, these companies will be transferred to the S&P SmallCap 600, replacing Methode Electronics (MEI ). , Chatham Lodging Trust (CLDT), Northfield Bancorp (NFBK), Xperi (XPER), Resources Connection (RGP) and ATN International (ATNI).
Krystal Biotech (KRYS), Virtu Financial (VIRT), StepStone (STEP), Cactus (WHD) and Tidewater (TDW) will replace OraSure Technologies (OSUR), Marcus Corp (MCS), TTEC Holdings (TTEC), Medifast (MED) and Cerence (CRNC), respectively in the S&P SmallCap 600.
The story continues
ETFs in the spotlight
SPDR S&P 500 ETF Trust (SPY)
SPDR S&P 500 ETF Trust tracks the S&P 500 Index and holds 503 stocks in its basket, each representing no more than 7% of assets. It charges investors 9 basis points in annual fees and trades an average daily volume of 53 million shares. SPY has $534.1 billion in assets under management and a Zacks ETF Rank #2 (Buy) with a Medium Risk Outlook (read: 5 Best Performing S&P 500 ETF Stocks of May).
iShares Core S&P 500 ETF (IVV)
With $456.7 million in assets under management, the iShares Core S&P 500 ETF is much smaller than SPY and less liquid, trading an average daily volume of 4 million shares. It charges just 3 basis points in annual fees, which is 6 basis points less than the State Street product. The iShares Core S&P 500 ETF has a Zacks ETF Rank #1 (Strong Buy) with a Medium Risk Outlook.
Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF also directly tracks the S&P 500 Index and holds 504 stocks in its basket. It has amassed $464 billion in assets and charges investors 3 basis points in annual fees. The Vanguard S&P 500 ETF trades in an average daily volume of 4.4 million shares and has a Zacks ETF Rank #1 with a Medium Risk Outlook.
iShares Core S&P Mid-Cap ETF (IJH)
The iShares Core S&P Mid-Cap ETF is the most popular fund in the mid-cap sector, with $83.2 billion in assets under management and an average daily volume of 5.5 million shares. It tracks the S&P MidCap 400 Index and holds 406 stocks in its basket. Industrials, Financials, Consumer Discretionary and Information Technology are the top four sectors with double-digit exposure each. The iShares Core S&P Mid-Cap ETF charges 5 basis points in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium Risk Outlook.
iShares Core S&P Small Cap ETF (IJR)
The iShares Core S&P Small-Cap ETF provides exposure to small-cap U.S. stocks and tracks the S&P SmallCap 600 Index. The iShares Core S&P Small-Cap ETF holds 681 stocks in its basket, none of which represent more than 2 .1% of assets. Financials, Industrials, Consumer Discretionary, and Information Technology are the top four sectors with double-digit exposure each. The iShares Core S&P Small-Cap ETF is the largest and most popular ETF in the small-cap space, with $78.4 billion in assets under management and an average daily volume of 3 million shares . The product charges investors 6 basis points in annual fees (read: 5 ETFs leading the small-cap rally).
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SPDR S&P 500 ETF (SPY): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
iShares Core S&P Mid-Cap ETF (IJH): ETF Research Reports