Key Takeaways:
- Marvell Technology ($264B) and Flex ($59B) join the S&P 500 index.
- Campbell's and Pool Corp will be removed effective June 22.
- Marvell surged 6% after hours; Flex gained 4% on the news.
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Marvell and Flex to join S&P 500 in $320B index reshuffle
S&P Dow Jones Indices will add Marvell Technology and Flex to the S&P 500, replacing Campbell's and Pool Corp in a $320 billion market-cap reshuffle.
"Marvell is widely expected to be the next company included in the S&P 500," Jeffrey Favuzza, who works on the Jefferies trading desk, said in a note.
Marvell, the chipmaker with a $264 billion market capitalization, dwarfs the next-largest eligible candidate, Bloom Energy at roughly $82 billion. Flex, an electronics manufacturer serving data-center customers, had a $59 billion market cap at Wednesday's close — nearly double the $34 billion of Twilio, the next-largest S&P MidCap 400 constituent. The changes take effect before the open on June 22.
The additions force passive index funds and constrained active managers to buy shares of both companies, providing a sustained demand catalyst. The removals of Campbell's and Pool Corp could trigger selling pressure on those stocks as funds rebalance.
Marvell's inclusion had been widely anticipated after the company met the S&P 500's profitability requirement late last year. The chipmaker has maintained an average market capitalization of about $54 billion over the past year, according to Melissa Roberts, an analyst at Stephens, distinguishing it from companies whose valuations may have spiked temporarily.
The index committee has latitude in selecting new members and does not strictly choose the most valuable eligible candidates. In the March rebalance, the committee added four companies, including optical suppliers Lumentum Holdings and Coherent, but opted for zero changes last June.
S&P Dow Jones Indices also declined to modify its inclusion rules to allow companies like SpaceX — which posted a net loss last year — to join sooner, maintaining the requirement that companies be listed for at least one year and meet profitability thresholds.
The information-technology sector is underrepresented in the S&P 500 relative to its weighting in the broader S&P Total Market Index, a factor the committee informally considers when making additions.
Marvell's stock surged nearly 5% on Thursday and has more than tripled this year. Flex shares rose 4% in after-hours trading following the announcement.
This article is for informational purposes only and does not constitute investment advice.
[1] Marvell Technology and Flex to be added to S&P 500[2] Marvell looks poised to finally get a spot in the S&P 500 after explosive stock surge - MarketWatch[3] Marvell Technology and Flex to join S&P 500 index, replacing Pool and Campbell's[4] Marvell Technology and Flex to join S&P 500 effective June 22[5] Marvell Technology stock continues to rally after Jensen Huang's bullish shout-out
