Key Points
Starting Friday, it will be a component stock on the S&P SmallCap 600 index.
Wednesday's price pop was due largely to index funds loading up on the space company's equity.
Karman Holdings (NYSE: KRMN) was an outlier on the stock exchange on Hump Day. The space and defense stock was popular among investors because it was added to an important equity index. With that bracing tailwind at its back, the stock closed the day up by more than 6%.
Changes coming this week
S&P Dow Jones Indices, operator of popular market gauges such as the S&P 500 index, announced its latest realignment after market close on Tuesday. Karman is being added to the S&P SmallCap 600 index, replacing specialized healthcare company BrightSpring Health Services.
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In turn, BrightSpring is "graduating" to the S&P MidCap 400 index to replace industrial company Chart Industries. The latter is in the process of being acquired by peer Baker Hughes, which, incidentally, is a constituent stock of the S&P 500. That deal is expected to close on Thursday, July 16.
The index manager's changes will take effect prior to market open this coming Friday.
The ever-popular inclusion bump
Whenever a stock is tapped for a well-known index, its price usually ticks up as index funds load up on it for their portfolios; this was certainly a factor in Karman's Wednesday pop.
I need to point out here that while index inclusion gives a company a higher profile on the market among investors and financial professionals, it almost never has a meaningful impact on its operations -- and, therefore, fundamentals. I'd urge investors to seriously consider this when looking at Karman stock post-inclusion.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chart Industries and Karman. The Motley Fool has a disclosure policy.