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Here's Why Independent Bank Group Stock Is Rising Today

By Matthew Frankel, CFP® – Jun 18, 2020 at 3:37PM

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The bank is joining a prestigious stock index.

What happened

The stock market is having a generally flat session today, but one major outperformer in the financials sector is Independent Bank Group (IBTX -0.48%), a Texas-based regional bank with over 40 branches in the Dallas, Austin, and Houston metropolitan areas.

As of 2:45 p.m. EDT, shares of Independent Bank were up by about 10%.

Stock quotes in a newspaper.

Image source: Getty Images.

So what

On Wednesday night, it was announced that Independent Bank will be joining the S&P SmallCap 600 stock index effective Monday, June 22. If you aren't familiar, there are three main broad-based S&P indexes -- the S&P 500, which consists of large companies; the S&P MidCap 400, which is companies that are in the middle; and the S&P SmallCap 600. Collectively, the three indexes are called the S&P 1500.

Now what

Inclusion in an index doesn't change anything about the underlying business and doesn't make a company's intrinsic value rise all by itself. However, it does mean that funds that track the S&P SmallCap 600 index will be required to buy shares of Independent Bank once it is added, and the anticipation of this buying pressure could be what is making the stock rise. Being added to an index can also bring added investor attention to a stock, as it could be a signal to the market that a company is growing.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Independent Bank Group Stock Quote
Independent Bank Group
$64.79 (-0.48%) $0.31

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