Yesterday,
financial analysts and Brew writers alike waited around all day for
Tesla’s earnings report like it was George R.R. Martin’s next GoT book. Tesla delivered: The electric automaker posted $104 million in net income, paving the way for inclusion in the S&P 500.
That’s a big deal
The S&P
500 tracks the performance of 500 of the largest companies listed on
U.S. stock exchanges. In order to paint an accurate picture of U.S.
stocks, it is occasionally rebalanced—companies are added and removed—by
an eight-member Index Committee. The committee uses quantitative and
qualitative metrics to determine if a company should be included...but
only after it becomes eligible.
-
How do you become eligible? Among
other things, do what Tesla just did: Report four consecutive quarters
of profitability, including the most recent quarter.
Tesla is huge
- It's up over 270% so far this year, including a more than 50% increase in July alone.
Tesla would be the most valuable company ever added to the index—and larger than 95%
of the companies currently listed. And while a potential S&P
inclusion might send its stock even further into ludicrous mode...
The S&P bump isn’t really a thing
Companies do
typically see a short term uptick in value, but “this price effect is
largely temporary and reverses gradually after the inclusion,” professor
Maria Kasch told the WSJ.
-
The data backs it up: Of the 10 companies added to the S&P this year, only five have outperformed the broader index.
- But if we've learned one thing, rules don't really apply to Tesla. Shares rose about 4% after hours.
Bottom line: Remember,
eligibility ≠ inclusion, but it's hard to see the Index Committee,
which can add a company to the S&P at any time, saying no to the
world's most valuable automaker.
+ While we're here: Tesla said it's going to build its next Gigafactory near Austin, TX.
|
I AM A REPUBLICAN BORN AND BRED
IN AMERICA .I BELIEVE IN EQUALITY AND JUSTICE AND THE CONSTITUTION OF THE UNITED STATES.I SERVED IN THE UNITED STATES AIR FORCE
MAJORED IN GEOLOGY AND MUSIC AND WENT TO ANGELO STATE IN SAN ANGELO, TEXAS
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