Tutor Perini (TPC +1.20%) has been tapped for inclusion on an index run by a high-profile financial information and analysis company, and investors were there for it on Tuesday. Following the news, they eagerly snapped up shares of the construction company, leaving it with a nearly 8% gain that trading session.
Graduation day
Just after market close on Monday, S&P Global's S&P Dow Jones Indices announced modifications to its S&P MidCap 400 and S&P SmallCap 600 indexes.
Image source: Getty Images.
The one that affected Tutor Perini was the looming departure of a fellow construction stock, Taylor Morrison Home, from the S&P MidCap 400. Taylor Morrison is being acquired by the once Warren Buffett-led Berkshire Hathaway and will no longer be an independent company.
Taylor Morrison's place in that index will be taken by current S&P SmallCap 600 constituent Krystal Biotech (KRYS -0.84%). In turn, Tutor Perini will supplant Krystal Biotech in that lineup.
These changes will take effect prior to market open this Friday, July 24.
NYSE: TMHC
Key Data Points
Indexes and effects
What we're witnessing is mostly the vaunted "index effect," in other words, the market's usual knee-jerk reaction to a stock either joining an index or "graduating" to one comprised of titles with higher market caps. In either case, the affected stock instantly becomes a target of index funds obligated to stuff their portfolios with index constituents.
I should stress that this tends to have little, if any, effect on a company's fundamentals (although it's excellent for some free publicity). Given that, I'd maybe wait for Tutor Perini stock to cool from this news if I were interested in buying it.
