This morning S&P Dow Jones Indices announced its March 2018 quarterly rebalance of the S&P/ASX Indices.
Whilst there are changes across all of its major indices, the All Ordinaries (Index: ^AXAO) (ASX: XAO) is by far the index with the most going on this quarter.
A total of 64 new shares will be added to the index at the expense of the same number of existing constituents on March 19.
Here is a quick summary of some of the changes being made this quarter:
There have been a number of eyebrow-raising additions to the index this quarter.
This includes the addition of the first medicinal cannabis company on a major Australian index – Cann Group Ltd (ASX: CAN).
Infant formula hopeful Bubs Australia Ltd (ASX: BUB) will also be a new entrant to the index.
A lot of the companies making way for these new additions will not be a surprise to investors.
I think it is fair to say that all five companies have had a disastrous 12 months, so their removal would have been largely expected.
When the All Ordinaries rebalances it often provides a short-term lift to the shares added to the index and the reverse to shares removed from the index.
This is largely because index funds that track the market need to buy or sell shares accordingly. But also because some fund managers are restricted from buying shares that are not included in the All Ordinaries. This could mean they have to dump shares that have been kicked out or can now buy shares that they have been previously unable to buy.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of CBL Limited. The Motley Fool Australia has recommended GBST Holdings Limited. 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 Scott Phillips.