Winners And Losers From This Year's Nasdaq-100 Reconstitution

Tyler Durden's picture

Last night, the NASDAQ announced that Facebook (FB) will replace Infosys (INFY) in the NASDAQ-100 index. This change will become effective next Tuesday, December 11, after market close. This is merely the first swap in what is an annual Index reconstitution tradition for the tech-heavy, IPO-error prone index: next Friday, December 14, the NASDAQ will announce the official full list of new entrants and exit-ants from the index, which will take place on December 21, which usually serves as a technical buying boost for the new members, while those companies kicked out see substantial selling pressure as index funds no longer have to own the names. Below we present an analysis by Deutsche Bank's Bo Huang who lists, in order of conviction the names most likely to benefit (additions), and be punished (removals), from the reconstitution. 

The names likely most likely to benefit: Kraft Foods, Regeneron, Libery Media, Analog Devices, Catamaran and Equinix. On the other hand, those holding Netflix, Apollo Group, Warner Chilcott, Green Mountain Coffee, Electronic Arts, Flextronics, or the recent Lazarus, until a month ago left for dead, Research in Motion, may want to quietly sell their holdings. They will likely have a better re-entry point after next Friday's announcement and prompt reallocation.

From Deutsche:

This year, we anticipate 8 pairs of Additions to and Deletions from the NASDAQ-100 index.

  • 8 Additions: KRFT, REGN, LMCA, ADI, CTRX, EQIX, LBTYA, DISCA
  • 8 Deletions: APOL, WCRX, GMCR, EA, FLEX, RIMM, NFLX, MRVL

Furthermore, we also present 3 pairs of possible, low conviction Additions and Deletions. As these Deletion companies are right on the boundaries of the NASDAQ-100 ranking methodology cut-offs, they could either remain in the index or be deleted and replaced.

  1. 3 Low Conviction Additions: VRSK, SBAC, WDC
  2. 3 Low Conviction Deletions: VRSN, LRCX, XRAY

Please see Figures 1 and 2 within for our index impact estimates and more details.

NASDAQ will announce the official changes next Friday, December 14 and implement them the following Friday, December 21. We will publish an official analysis following the announcement.

And in table format: