Today, the S&P Dow Jones Indices announced the addition of six promising Australian companies into the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO).
The ASX200 is reserved for the biggest and most frequently traded Australian companies. It is, along with the ALL ORDINARIES, the most commonly quoted index in financial media.
Usually, companies are added to the list when their market capitalisation increases significantly or, in the case of two of today's additions, when they've only recently listed on the market.
Being added to the ASX200 is an important advantage for many aspiring companies, for a number of reasons.
Firstly, it means index funds – the huge money managers which buy proportionate weightings of all companies included in an index – are forced to buy the stock.
It could also mean large superannuation funds are now able to enter the fray and buy up the stock.
Further, given the increased liquidity and size of the companies in the index, many more analysts will undertake research and initiate coverage of the stock, which could drive investor demand significantly.
The six most recent additions to the S&P/ASX index are:
- Corporate Travel Management Ltd (ASX: CTD) – up 101% in the past year and 1.2% today.
- Syrah Resources Ltd (ASX: SYR) – up 63% in the past year and 3% today.
- Dick Smith Holdings Ltd (ASX: DSH) – up 8.5% in the past year and 2.4% today
- Australian Agricultural Company Ltd (ASX: AAC) – up 25% in the past year and 1.3% today.
- Estia Health Ltd (ASX: EHE) – Up 1.2% today and more than 20% since listing late in 2014.
- Regis Healthcare Ltd (ASX: REG) – shares are mostly flat today despite trading up 34% since listing in October 2014.
Are they a buy?
When a company enters either the ASX200 or ASX300, investors should pay close attention to it because its growth could be just beginning. Indeed each of these companies are deserving of further research and should at least hold a spot on your watchlist.
