Huge Buying For 5 Stocks On Russell Index Month End Changes

Investing

Published: July 29, 2015 9:59 am

All of the major indices rebalance their share weightings on a regular basis as their components change in share price and in market capitalization. Generally speaking on index weightings with true rebalances, market cap changes dictate either buying or selling of shares at a designated time. This Friday on the close the Russell 1000 and the Russell 2000 will have their month-end rebalance of shares.

In a new research note from Jefferies, they highlight the top buy and sells for the index scheduled for Friday. We screened the list for five quality companies that will see the highest amount of shares bought on the close Friday. There is also a special note below on some of the considerations that have to be considered around chasing the “indexers” around index rebalances.

Frontier Communications Corporation (NASDAQ: FTR) is a communications carrier expected to see a large amount of share demand on Friday. The Jefferies team estimates that the index will buy 2,805,000 shares on the final print of the day. That is about 15% of the 10 day average volume. The company provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. The shares closed Tuesday at $4.61.

NRG Yield Inc. (NYSE: NYLD) owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the U.S. The Jefferies team expects that a whopping 2,058,454 shares of the Yieldco will be bought on the close of trading Friday. That represents a 59% increase in the average 10 day trading volume. The stock closed on Tuesday at $19.35.

New Residential Investment Corp. (NYSE: NRZ) will likely have a load of stock hit the tape on Friday. The Jefferies team estimates a gigantic order of 2,298,478 shares will be bought. What stands out here is that this is a 155% increase in the ten day average trading volume. The company is a real estate investment trust (REIT) that focuses on investing in and managing residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The stock closed Tuesday at $15.38.

Amicus Therapeutics (NASDAQ: FOLD) is a biotechnology stock that will likely see a big imbalance buy order on the close Friday. The Jefferies analysts expect that 1,422,186 shares of the stock will be purchased. That represents 74.5% increase of the average ten day trading volume. Amicus is a bio-pharmaceutical company that focuses on the discovery, development, and commercialization of medicines for various rare and orphan diseases. The stock closed yesterday at $15.93.

New Senior Investment Group Inc. (NYSE: SNR) will also see a ton of stock be bought on the close Friday. The Jefferies team expects that Russell Index buyers will purchase a total of 1,468,395 shares of the stock. That will represent a 78% increase over the average ten day trading volume. The company is a publicly-traded real estate investment trust with a diversified portfolio of senior housing properties across the United States. As of March 31, 2015, they are one of the largest publicly-traded owners of senior housing properties, owning 121 properties across 31 states. The shares closed Tuesday at $12.66.

ALSO READ: 7 Banks Trading Under Book Value

While the purchases will come as no to surprise to many index investors and arbitrage traders (indexers), they are generally considered as helping to put in a theoretical floor under each stock’s pricing. That being said, investors need to consider that many indexers make their trades before, during, and after formal index rebalance trades.

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