By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Next Gen Econ
  • Home
  • News
  • Personal Finance
    • Credit Cards
    • Loans
    • Banking
    • Retirement
    • Taxes
  • Debt
  • Homes
  • Business
  • More
    • Investing
    • Newsletter
Reading: 3 Stocks To Watch: How CrowdStrike, KKR, And GoDaddy Benefit From The Index Effect
Share
Subscribe To Alerts
Next Gen Econ Next Gen Econ
Font ResizerAa
  • Personal Finance
  • Credit Cards
  • Loans
  • Investing
  • Business
  • Debt
  • Homes
Search
  • Home
  • News
  • Personal Finance
    • Credit Cards
    • Loans
    • Banking
    • Retirement
    • Taxes
  • Debt
  • Homes
  • Business
  • More
    • Investing
    • Newsletter
Follow US
Copyright © 2014-2023 Ruby Theme Ltd. All Rights Reserved.
Next Gen Econ > Investing > 3 Stocks To Watch: How CrowdStrike, KKR, And GoDaddy Benefit From The Index Effect
Investing

3 Stocks To Watch: How CrowdStrike, KKR, And GoDaddy Benefit From The Index Effect

NGEC By NGEC Last updated: June 10, 2024 3 Min Read
SHARE

For active investors, the inclusion of CrowdStrike Holdings (CRWD), KKR (KKR), and GoDaddy (GDDY) in the S&P 500 index on June 24th presents a unique opportunity to potentially capitalize on a well-documented market phenomenon. These three stocks jumped in after-hours trading following the announcement on Friday, drawing the attention of market participants seeking to benefit from the short-term outperformance that often accompanies such index changes.

This phenomenon, known as the “index effect,” refers to the tendency of stocks added to a popular index like the S&P 500 to outperform the market between the announcement and effective dates, often followed by a minor correction post-inclusion. The temporary outperformance is primarily driven by increased demand from index funds and institutional investors who closely track the S&P 500 and adjust their holdings to mirror the index.

A recent example came this March when it was announced that Super Micro Computer (SMCI) and Deckers Outdoor (DECK) would be joining the S&P 500. On the day of the announcement, Super Micro (the AI server, software and infrastructure company) was up more than 25% during the session while DECK, the footwear and apparel company best known for Uggs and Teva brands was up 2.6% on the announcement. The difference between the growth prospects for general AI and shoes reflects the difference in pop in stock prices. Nevertheless, these returns were greater than what the S&P 500 saw on those days.

The growth of passive investing through index-linked investment products and exchange-traded funds (ETFs) has been remarkable over the past five decades. The S&P 500 has become a particularly attractive benchmark for passive investors due to its low turnover and long-term investment approach, with an average of only 25 changes annually, representing about 5 percent of the total number of stocks. For most passive investors, an ETF tracking the S&P 500 makes good sense, as it provides broad exposure to the U.S. stock market and has historically delivered solid returns.

However, active managers argue that the rigid investment mandate of passive index funds may cause investors to miss out on opportunities that arise from changing market conditions. By conducting thorough research and analysis, active managers can identify undervalued companies with strong growth potential and construct a portfolio tailored to their investment objectives and risk tolerance. This flexibility to adapt and capitalize on market inefficiencies may give active management an edge over passive index funds in the long run.

Read the full article here

Sign Up For Daily Newsletter

Be keep up! Get the latest breaking news delivered straight to your inbox.

By signing up, you agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.
Share This Article
Facebook Twitter Copy Link Print
What do you think?
Love0
Sad0
Happy0
Sleepy0
Angry0
Dead0
Wink0
Previous Article What’s the maximum home improvement loan amount you can get?
Next Article The Empath and the Narcissist: A Dangerous Dance of Opposites
Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

FacebookLike
TwitterFollow
PinterestPin
InstagramFollow
TiktokFollow
Google NewsFollow
Most Popular
The Real Cost of Aging Alone in Suburban America
July 4, 2025
9 Senior Citizen Discounts That Quietly Vanished This Year
July 4, 2025
6 Times Online Banking Locked Out Retirees in an Emergency
July 4, 2025
Here Are The Deals and Freebies on 4th of July 2025
July 4, 2025
13 States That Don’t Tax Your Retirement Income
July 4, 2025
Housing Discrimination: Definition And Examples
July 4, 2025

You Might Also Like

Investing

Investing Advice That Reddit Got Very Wrong — Or Very Right

17 Min Read
Investing

Stocks, Bonds And Mutual Funds: Key Differences

10 Min Read
Investing

You Bailed During The Stock Market Dip: 5 Moves To Make Now

11 Min Read
Investing

5 Of The World’s Richest Crypto Billionaires

7 Min Read

Always Stay Up to Date

Subscribe to our newsletter to get our newest articles instantly!

Next Gen Econ

Next Gen Econ is your one-stop website for the latest finance news, updates and tips, follow us for more daily updates.

Latest News

  • Small Business
  • Debt
  • Investments
  • Personal Finance

Resouce

  • Privacy Policy
  • Terms of use
  • Newsletter
  • Contact

Daily Newsletter

Subscribe to our newsletter to get our newest articles instantly!
Get Daily Updates
Welcome Back!

Sign in to your account

Lost your password?