Andrew Bary
Super Micro Computer could be the next stock added to the Nasdaq 100 index, while the companies most vulnerable to deletion are Walgreens Boots Alliance, Warner Bros. Discovery, Illumina, and MongoDB.
On Thursday night, the index added Arm Holdings, the U.K. chip maker, and dropped Sirius XM Holdings in a move that Barron's had predicted could occur. The index's methodology offers clues about what stocks could drop out.
The change will occur before the market opens on June 24. Sirius XM stock was down 0.8% Friday to $2.52, while Arm was 3.6% higher at $163.67.
Sirius XM was vulnerable because it has the smallest market value in the index at around $10 billion. Arm weighs in at more than $160 billion.
Super Micro Computer, the maker of servers used to handle artificial-intelligence queries, has a market value of $50 billion. Not counting Sirius XM, Walgreen has the lowest market value in the Nasdaq 100 at $13 billion, followed by MongoDB, Illumina, and Warner Bros. Discovery.
These four stocks are down sharply this year. MongoDB is off about 45%, making it the second-worst performer in the index behind Sirius XM, with a 54% loss as of Friday morning.
Super Micro has tripled in 2024, a gain that has allowed it to be added to the S&P 500 index.
The Nasdaq 100, which is composed of 100 of the largest nonfinancial companies listed on the Nasdaq, requires that companies maintain a weighting of at least 0.1% of the index's value. With the Nasdaq 100 index up about 16% this year and valued at $23 trillion, the cutoff is $23 billion. Walgreen, Warner Bros. Discovery, Illumina, and MongoDB, which are valued at less than $20 billion, no longer qualify.
The Nasdaq says that a failure to maintain an 0.1% weighting for two consecutive months can result in a company's deletion from the Nasdaq 100 if a suitable replacement can be found.
"Any security that fails to maintain a weight of at least 0.10% for two consecutive month-ends will be replaced, subject to the availability of a replacement security with a larger market capitalization," the index's methodology says. "If no such security is available, the incumbent security will remain in the Index until a suitable replacement can be identified."
The next change could come in conjunction with the quarterly rebalancing in September or perhaps sooner. "If, at any time, it is determined that an index security is ineligible for continued inclusion, it will be removed as soon as practicable," the methodology says.
The Nasdaq doesn't comment on potential additions or deletions to the index. The Nasdaq allows international companies with U.S. American depositary receipts to be included in the 100 index, while the S&P 500 is limited to U.S. companies.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 14, 2024 11:10 ET (15:10 GMT)
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