What happened
Organogenesis Holdings (ORGO), a regenerative health products specialist, shot skyward Thursday thanks to its inclusion on a key stock market index.
So what
On Wednesday, after market close, S&P Dow Jones Indices -- operator of the famous S&P family of indexes -- announced a pair of changes to two of those indexes. Organogenesis healthcare sector peer Cantel Medical is being removed from the S&P MidCap 400 index, as it's being acquired by Steris.
Image source: Getty Images.
Cantel, therefore, needs to be replaced, and the chosen party is shoe maker Crocs, currently a component of the S&P SmallCap 600 index. Since Crocs is vacating its S&P SmallCap 600 index spot, it also must have a successor, and Organogenesis has been tapped for the position.
These changes will be effective prior to market open next Wednesday, June 2.
Since S&P indexes are considered by many investors to be the benchmark equities indicators, inclusion on one instantly raises a company's profile. So it is with Organogenesis, a young healthcare company that has shown strong growth and more habitual profitability of late but was largely unknown by the general investing public.
Now what
Inclusion on any index, no matter how high profile, barely -- if at all -- affects a company's fundamentals or business strategy. Organogenesis will now be targeted by index funds trawling the S&P indicators for good growth stocks, but investors are better off buying the stock if they believe in its potential rather than its popularity.
