Editor's Note: This content was originally published on
by Todd Shriber.
Electric car maker
) is no stranger to fanfare.
The company and its high-flying shares got a little bit more of
that on Monday evening when NASDAQ OMX Global Indexes announced the
stock will replace
) as a member of the
Tesla will join the NASDAQ-100 and the
NASDAQ-100 Equal Weight Index
(INDEXNASDAQ:NDXE) on July 15, thus making the stock eligible for
such as the
) and the
First Trust NASDAQ-100 Equal Weighted Index Fund
As a story stock, Tesla is also a controversial stock. Critics say
the valuation is stretched. Supporters say the company is
revolutionizing the auto industry. No matter what one's feeling are
about Elon Musk's company, chances are those feelings are strong.
almost 32% short interest as of mid-June
despite the fact that the shares have tripled in the past 90 days
says as much.
Investors are even arguing whether or not the move to the
NASDAQ-100 is already priced into shares of Tesla. Maybe it is,
assuming the fund managers that benchmark to that index have
already bought exactly the amount of Tesla stock they need to be
inline with index parameters.
Those looking for clues regarding the impact a jump to the
NASDAQ-100 and QQQ can have on a stock just need to go back to
December when 10 additions and subtractions to the index, and
subsequently the ETF, were made.
The following 10 stocks became members of the NASDAQ-100 on
December 24, 2012:
Over the month that followed, all of those stocks rose. Regeneron
was the worst performer with a gain of 0.6%; Western Digital was
the best performer, gaining 14.3%. The NASDAQ-100 is re-ranked each
year in December, timed to coincide with the quadruple witch
expiration Friday of the quarter,
according to NASDAQ OMX Global Indexes
None of those stocks are prominent members of QQQ. Combined, the 10
represent less than 3.8% of the ETF's weight with Regeneron
receiving the largest weight at 0.54 percent. Said another way,
(CSCO) alone accounts for almost 3.9% of QQQ.
Based on a current market cap of $14.1 billion, if Tesla was a QQQ
holding today, it would have slightly less of an impact on the ETF
than Analog Devices. That stocks has a weight of 0.41% in the ETF,
according to PowerShares data
It is safe to say that Tesla's inclusion in a particular index is
not going to do anything about the stock's valuations or motivate
any to buy or not buy its cars. And although the stock has been on
fire, Tesla bulls may want to see the stock booted from the index.
(NFLX) almost doubled in the first quarter of this year after being
removed from the NASDAQ-100 last December. The stock has since
rejoined the index.
Green Mountain Coffee Roasters
(GMCR) was removed with Netflix and has not rejoined the
NASDAQ-100. That stock is up 67% this year.
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