Could Blackmores Limited shares shoot higher today?

Credit: Blackmores

What: Blackmores Limited (ASX: BKL) has taken the spot of Spotless Group Holdings Ltd (ASX: SPO) in the S&P/ASX 100 (Index: ^AXTO) (ASX: XTO).

Thanks to the S&P Dow Jones Indices June 2016 quarterly rebalance Blackmores can now count itself as part of Australia’s top 100 public companies.

Source: Google Finance

Source: Google Finance

So what: Without being considered a top 100 company, many fund managers may have been prohibited from buying Blackmores shares, until now. So with the help of other passive money managers such as index funds and ETFs, Blackmores shares could receive a welcome boost in the near future.

The index inclusion puts Blackmores on the radar of professional investors and their analysts. However, retail investors are also likely to take note of the company’s stellar performance and index inclusion as a signal of strength.

Conversely, investors may take Spotless Group’s removal as a sign of weakness.

Now what: Taking note of new index participants is a good way to identify potentially promising smaller companies.

Also included in today’s rebalance was the admission of a2 Milk Company Ltd (Australia) (ASX: A2M) into the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Like Blackmores, investors have attributed much of a2 Milk’s one-year 173% share price rally to the growing demand for quality consumer products from China.

If you haven’t already, it may be time to run the ruler over both Blackmores and a2 Milk shares.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned in this article. You can follow Owen on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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