Bank of America: Robinhood (HOOD.US) becomes the “best candidate” for S&P 500 constituent stocks or welcomes large-scale increases in passive fund holdings

The Zhitong Finance App learned that Bank of America indicated that Robinhood Markets (HOOD.US) is the “most likely candidate company” for the S&P 500 (S&P 500) component stock adjustments to be announced on Friday. If this landmark event comes true, it will encourage passive funds to increase their holdings of this online brokerage firm on a large scale.

A team led by analyst Craig Siegenthaler (Craig Siegenthaler) mentioned in a report that investors focused on the company in a conference on potential index adjustments in financial stocks. As both the stock market and the cryptocurrency market strengthened, Robinhood's stock price recently surged and hit a record high for the first time in nearly four years on Tuesday.

On Wednesday afternoon, the stock rose slightly by 0.3% after fluctuating between ups and downs. Companies that join the US benchmark index usually experience a sharp rise in stock prices. Cryptocurrency exchange Coinbase Global Inc.'s stock price rose 34% in the week it announced it joined the S&P 500 in May, even though investors were still digesting news of hacking attacks and regulatory scrutiny at the time.

Passive mutual funds and exchange-traded funds (ETFs) that track the S&P 500 index need to adjust their positions to match the index composition. Bank of America analysts expect that if Robinhood is selected, “passive funds will set off a significant buying wave of this stock.”

The analyst wrote, “The S&P 500 and Russell 1000 indices are the two main benchmarks for our large long-term long term clients. When companies are included, the attention of long-term multi-portfolio managers increases significantly; they actually have to research these companies and make investment decisions.”

Analysts pointed out that companies such as Ares Management (ARES.US), Carvana (CVNA.US), and AppLovin (APP.US) may also be included in the S&P 500, while IBKR.US (IBKR.US) may move from the S&P 400 index to another index. Furthermore, after Brookfield Asset Management (BAM.US) joined the Russell 1000 Index in June, it may first be included in the S&P All Market Index and later in the S&P 500 Index.