Why Carvana Stock Motored Higher on Monday
Key Points
The auto retailer's stock is about to become a component of the S&P 500 index.
While the company is already widely recognized among certain consumers, its profile will rise among investors.
It isn't every day that a stock gets to be a component of a hallowed equity index. On news Monday that auto retailer Carvana (NYSE: CVNA) had achieved such a distinction, investors eagerly traded its shares up by more than 12% that trading session.
Acceleration from ascension
On Friday after market hours, news hit the headlines that Carvana had been selected to join the bellwether S&P 500 index. This was one of a series of adjustments made to that index and others on a quarterly basis by S&P Dow Jones Indices, the company that manages the index.
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Carvana was one of three stocks ascending to the S&P 500 index, along with construction materials specialist CRH, and mechanical and electrical contracting services provider Comfort Systems USA. The three companies replace Mohawk Industries, LKQ, and Solstice Advanced Materials.
In addition to those changes to the S&P 500 index, S&P Dow Jones Indices also made adjustments to the S&P MidCap 400 and the S&P SmallCap 600 indexes. Of the three, the one Carvana is joining is widely considered to be the most closely followed and influential on the market.
The more things change...
This is why Carvana's share price leaped so high after the changes were reported. I should emphasize that this won't have any real impact on the company's operational and financial performance. It will, however, make its stock more appealing simply by being placed in what many consider to be the No. 1 equity index on the scene.
Carvana's ascension will occur before market open on Monday, Dec. 22.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA. The Motley Fool recommends LKQ. The Motley Fool has a disclosure policy.