Why Delek Holdings Stock Triumphed on Tuesday
Key Points
It will be one of the index's 600 components.
While that changes nothing fundamental about the company, it does increase its visibility.
Oil refining company Delek US Holdings (NYSE: DK) took a turn in the investor spotlight Tuesday. Its equity is soon to become a component of a noted small-cap stock index, and that increased visibility is already making the company more popular. It closed the day more than 5% higher.
1 of a special 600
As part of its regular quarterly rebalancing, S&P Dow Jones Indices -- the unit of S&P Global that manages the popular S&P series of stock market gauges -- announced a series of changes to several indexes.
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Among these is Delek's ascension to the S&P SmallCap 600 index, as part of a group of incoming stocks that includes titles as varied as Boston Beer, The Trade Desk, and Capri Holdings.
The new class displaces from the index such companies as Brinker International -- "graduating" to the S&P MidCap 400 index -- and Cogent Communications.
These changes will become effective prior to market open on Monday, Sept. 21.
Consider buying, but not for the immediate reason
Far more often than not, the price of a stock newly included in a well-known index sees a quick pop following the announcement. That's mainly because it instantly becomes a candidate for inclusion in the portfolios of index funds that constantly trawl instruments like the S&P SmallCap 600 index and its ilk. The increased visibility as an S&P index component doesn't hurt either.
We should bear firmly in mind that such inclusion changes little or nothing about a company's fundamentals. That being said, I feel Delek stock has upside potential, especially given the current state of its small refinery exemptions.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global and The Trade Desk. The Motley Fool recommends Boston Beer and Delek US. The Motley Fool has a disclosure policy.