The Nasdaq 100’s rebalance may be a blow for the market’s mega-cap stocks but there also will be some outperformers from the index’s weighting changes, according to Wells Fargo.
Nasdaq announced plans to rebalance the weightings of its constituents later this month to tackle “overconcentration” in the index following huge gains by the big tech names this year.
Wells Fargo analysts said the rebalance creates selling pressure on so-called “uber cap” names. They noted that during the Nasdaq 100’s rebalance in 2011 the top down-sized stocks—those whose weightings decreased the most—lagged by 2% to 3% between the announcement and the event itself, compared to the top up-sizers.
The biggest down-sizers this time will be
Microsoft
(MSFT),
Apple
(AAPL),
Nvidia
(NVDA),
Amazon
(AMZN),
Tesla
(TSLA),
Meta Platforms
(META), and
Alphabet
(GOOGL), according to the bank’s index strategists. The top up-sizers will be
Starbucks
(SBUX),
Mondelez International
(MDLZ),
Booking
(BKNG),
Gilead Sciences
(GILD),
Intuitive Surgical
(ISRG),
Analog Devices
(ADI), and
Automatic Data Processing
(ADP), they said.
However, they said the weight changes are “much smaller than in 2011.” For example, Apple’s weighting was cut from more than 20% of the index to around 12% in 2011, making it the largest down-sizer. This time Apple and Microsoft, the two top down-sizers, will have their weightings cut by less than 2 percentage points.
“We believe this liquidity event dents—but does not break—the longer-term uber-cap trend. In our view, similar to 2000, an aggressive [Federal Reserve] that pushes the U.S. into recession is what ultimately undoes the uber-cap and ‘new economy’ trades,” said the analysts, led by Christopher Harvey.
Write to Callum Keown at [email protected]
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