Electric car maker Tesla (NASDAQ:
) 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 Oracle (NASDAQ:
) as a member of the NASDAQ-100 Index (NASDAQ: NDX).
Tesla will join the NASDAQ-100 and the NASDAQ-100 Equal Weight
on July 15
making the stock eligible for inclusion in
such as the PowerShares QQQ (NASDAQ:
) 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
almost 32 percent short interest as of
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: Analog Devices (NASDAQ:
), Catamaran (NASDAQ:
), Discovery Communications (NASDAQ:
), Equinix (NASDAQ:
), Liberty Global (NASDAQ:
), Liberty Media (NASDAQ:
), Regeneron Pharmaceuticals (NASDAQ:
), SBA Communications (NASDAQ:
), Verisk Analytics (NASDAQ:
) and Western Digital (NASDAQ:
Over the month that followed, all of those stocks rose with
Regeneron being the worst performer with a gain of 0.6 percent.
Western Digital was the best, gaining 14.3 percent. 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 percent of the ETF's weight with
Regeneron receiving the largest weight at 0.54 percent. Said
another way, Cisco (NASDAQ:
) alone accounts for almost 3.9 percent 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
percent 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. Why? Because Netflix (NASDAQ:
) 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 (NASDAQ:
) was removed with Netflix and has not rejoined the NASDAQ-100.
That stock is up 67 percent this year.
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