SA Survey: Which company is most likely to be included next in the S&P 500?

[Golden writing of the S&P stock market index above a simple line chart - 3d illustration]
Christoph Burgstedt

Two of the most beloved tech stocks of the past year are getting some more love after finally making it into the S&P 500 Index (SP500 [https://seekingalpha.com/symbol/SP500]). Both AppLovin (APP [https://seekingalpha.com/symbol/APP]) and Robinhood (HOOD [https://seekingalpha.com/symbol/HOOD]) are up 7% in early trade on Monday following the pre-weekend announcement [https://seekingalpha.com/news/4492849-robinhood-and-applovin-rally-after-sp-500-inclusion-strategy-falls-after-missing-out], which was highly awaited by investors for quite some time. The two companies have seen record rallies over the last 12 months, soaring well over 400% to beat the gains of other tech favorites like Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) and even Palantir (PLTR [https://seekingalpha.com/symbol/PLTR]). _This other firm also joined the index_ [https://seekingalpha.com/symbol/EME/news]

_Why now? _S&P Dow Jones Indices doesn't give the reasoning behind its quarterly rebalancings, but the firms have been on the radar for some time. AppLovin (APP [https://seekingalpha.com/symbol/APP]) is a leading adtech company that gives mobile developers the ability to market, monetize, and analyze their apps. Robinhood (HOOD [https://seekingalpha.com/symbol/HOOD]) is also a tech company, more specifically in the fintech space, where it offers brokerage and financial services, as well as recently expanding into prediction markets [https://seekingalpha.com/article/4819377-prediction-markets-are-all-the-craze].

The S&P 500 Index (SP500 [https://seekingalpha.com/symbol/SP500]) is rebalanced quarterly by S&P Dow Jones Indices, which is owned by S&P Global (SPGI [https://seekingalpha.com/symbol/SPGI]) and CME Group (CME [https://seekingalpha.com/symbol/CME]). The joint venture maintains both the benchmark S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) and the Dow Jones Industrial Average (DJI [https://seekingalpha.com/symbol/DJI]), which are linked to many trillions of dollars in investment products. To be eligible for S&P 500 inclusion, a company must have a market capitalization of at least $22.7B, as well as meet profitability, liquidity, and financial metrics. More importantly, the S&P 500 committee also uses qualitative judgment to ensure the index is a suitable representation of the U.S. economy, compared to the largely quantitative factors that are used by indexes like the Russell 2000 (RTY [https://seekingalpha.com/symbol/RTY]) and NASDAQ 100 (NDX [https://seekingalpha.com/symbol/NDX]).

WHAT DO FUND MANAGERS DO NOW? Companies that get included in the S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) typically get a big bounce given the expected increase in demand for their shares. Passive investment funds and portfolios that are designed to track the index must purchase shares of the newly included stock to rebalance their holdings. Several weeks are given to resolve so-called "tracking errors," but the final effective date is typically one of the highest-volume trading days of the year, with trading desks managing large automated orders to reflect the new S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) weightings.

_SEEKING ALPHA SURVEY: _Which company is most likely to be included next in the S&P 500... Strategy (MSTR [https://seekingalpha.com/symbol/MSTR])? SoFi Technologies (SOFI [https://seekingalpha.com/symbol/SOFI])? Astera Labs (ALAB [https://seekingalpha.com/symbol/ALAB])? Another stock? Take the poll here [https://forms.gle/mMM53G4Htok1k9tz8] and share how it might continue to impact investors in the comments section.

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