With the Russell Index reconstitution happening at the close of the market on June 27, there will be a massive amount of stock movement, and millions of shares traded by index funds and traders trying to game the event. Some stocks are bought within the Russell 1000 or 2000 to increase their index weighting and some are sold to decrease their weighting. In some cases, stocks move between the two indexes.
The Jefferies Quantitative team expects that $1.3 billion in information technology stocks will be bought, and more than $900 million in consumer staples stocks that will be sold.
We wanted to focus on the top eight new stocks that are being added to the index. Investors that get a jump on adding these top names may see a lift as we get closer to the end of the month and the actual additions, assuming that market conditions comply.
Here are the eight new stocks that will be added to the Russell 1000 Index. Many had recent initial public offerings.
Ally Financial Inc. (ALLY) is the old financing arm of GM that was known before the great recession as GMAC. The company has been rebuilt into a stronger and more solvent Internet-focused bank with no brick-and-mortar locations. Its customers do their banking solely through the bank's website, its mobile application and automatic teller machines.
Jefferies expects more than 6.2 million shares of Ally to trade the day of inclusion. The Thomson/First Call price target for the stock is $27.85. The stock closed trading Monday at $24.73 a share.
CBS Outdoor Americas Inc. (CBSO) is the outdoor advertising division of broadcast giant CBS, which recently went public when shares began trading in March. The company is one of the largest lessors of advertising space on out-of-home advertising structures and sites across the United States, Canada and Latin America.
CBS Outdoor's portfolio primarily consists of billboard displays, which are predominantly located in densely populated major metropolitan areas and along high-traffic expressways and major commuting routes. Jefferies estimates 519,608 shares will trade. Investors receive an outstanding 4.6% dividend. The consensus price target is $34.43. CBS Outdoors closed Monday at $32.80.
Columbia Property Trust Inc. (CXP) will see buy tickets hit the desk for 2,893,770 shares on June 27. The company is one of the nation's largest office real estate investment trusts (REITs), investing in high-quality commercial office properties in primary U.S. markets.
Columbia Property Trust's portfolio includes 44 properties, consisting of 60 operational buildings and comprising approximately 16.8 million square feet located in 13 states and the District of Columbia. Investors are paid a very solid 4.5% dividend. The consensus price target is $30, and the stock closed Monday at $26.73.
Foster Wheeler A.G. (FWLT) was not an IPO this year, but it will see substantial buying of 2,309,000 shares the day it joins the Russell 1000. Foster Wheeler is a global engineering and construction company and power equipment supplier delivering technically advanced, reliable facilities and equipment.
The company's Global Engineering and Construction Group designs and constructs leading-edge processing facilities for the upstream oil and gas, LNG and gas-to-liquids, refining, chemicals and petrochemicals, power, minerals and metals, environmental, pharmaceuticals, biotechnology and health care industries. The consensus price target is $34.51 for the stock, which closed Monday at $34.50.
IMS Health Holdings Inc. (IMS) will see an estimated 1,730,945 shares on the buy side when it is added to the index. The company had an early April IPO and Wall Street firms like the new entry. IMS Health is a leading global information and technology services company providing clients in the health care industry with comprehensive solutions to measure and improve their performance.
By applying sophisticated analytics and proprietary application suites hosted on the IMS One intelligent cloud, the company connects more than 10 petabytes of complex health care data on diseases, treatments, costs and outcomes to help its clients run their operations more efficiently. The consensus price target for the stock is $27.45. IMS closed Monday at $23.83.
Platform Specialty Products Corp. (PAH) will see buying of 1,969,950 shares the day the company is added to the index. It is a global producer of high-technology specialty chemical products and provider of technical services. The business involves the manufacture of a broad range of specialty chemicals, created by blending raw materials, and the incorporation of these chemicals into multistep technological processes. The stock has been on fire this year, up over 100%. The consensus price target is set at $21, which is well below Monday's close of $28.05.
Sabre Corp. (SABR) was another high-profile IPO this year, and it will see more than a million shares purchased the day it is added to the index. Sabre is a leading technology provider to the global travel and tourism industry. Sabre's software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, such as passenger and guest reservations, revenue management and flight, network and crew management.
Sabre also operates a leading global travel marketplace, processing more than $100 billion of estimated travel spend in 2013 by connecting travel suppliers. The consensus price objective for the stock is $20.64. Sabre closed trading Monday at $19.21.
Tyco International Ltd. (TYC) makes a highly anticipated return to the index, with an expected 1,046,043 to be bought. The company is the world's largest pure-play fire protection and security company. Tyco provides more than 3 million customers around the globe with the latest fire protection and security products and services with the well-known ADT brand. Investors are paid a 1.6% dividend. The consensus price target is $45.47. Tyco closed Monday at $45.37.
Legging some money into these names that are to be added might be a solid investment idea for long-term investors. Sometimes names that are shown the door end up trading higher. A good example of that was when long-term Dow Jones member Alcoa was removed and has almost doubled since. Just remember, if the market falls handily, index buying will only slow down the selling a bit in those shares.