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ETFs in Focus on the Upcoming S&P 500 Shake-Up

The popular S&P Dow Jones Indices are set to get the customary new look this month. Every year, on the third Friday of June, the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices undergo a rebalance. The shake-up leads to strong gains for the stocks joining the indices.

Thus, ETFs targeting the S&P Dow Jones Indices are currently in focus. These include SPDR S&P 500 ETF Trust SPY, iShares Core S&P 500 ETF IVV, Vanguard S&P 500 ETF VOO, iShares Core S&P Mid-Cap ETF IJH and iShares Core S&P Small-Cap ETF IJR.

What’s In & What’s Out?

KKR & Co. Inc (KKR), CrowdStrike Holdings (CRWD) and GoDaddy Inc. (GDDY) will enter the S&P 500, replacing Robert Half Inc. (RHI), Comerica Inc. (CMA) and Illumina Inc. (ILMN). The inclusion of the new stocks in the S&P 500 is like a ticket for them to shine bright. It will boost a company’s investor profile and add to its liquidity — two factors that can potentially propel its stock price higher. In the last rebalancing, Super Micro Computer (SMCI) soared to an all-time high, shortly after joining the index in early March (read: More S&P 500 Rally in the Cards? ETFs to Gain).

The inclusion of KKR underscores its extraordinary growth in recent years. The private investment business laid out a plan to reach at least $1 trillion of assets under management in five years. The addition of CrowdStrike and GoDaddy to the S&P 500 will fuel substantial growth as investors are seeking to capitalize on growth in cloud computing and artificial intelligence.

CRWD has been benefiting from the soaring demand for cyber-security solutions amid rising data breaches. Its sustained focus on rolling out new products, acquisitions and partnerships is expected to continue to boost sales. The stock has more than doubled over the past year to become the second-best performer in the tech-heavy Nasdaq 100 Index, trailing only NVIDIA (NVDA).

GDDY has been benefiting from strong momentum across the Applications & Commerce business. Strength in Create & Grow solutions is aiding the Application & Commerce segment's top-line growth. Moreover, growth in bookings, primarily driven by substantial customer additions and price increases in various domains, has been a key catalyst for the company.

Shake-Up in Other Indices

Illumina will also replace GoDaddy in the S&P MidCap 400. Robert Half and Comerica will replace Anywhere Real Estate (HOUS) and Adtran Holdings (ADTN), respectively in the S&P SmallCap 600.

Texas Pacific Land (TPL), BioMarin Pharmaceutical (BMRN), Warner Music (WMG), Nextracker (NXT), Altair Engineering (ALTR) and RB Global (RBA) will replace Werner Enterprises (WERN), Integra Lifesciences (IART), Penn Entertainment (PENN), Grocery Outlet (GO), Leggett & Platt (LEG) and Hertz Global (HTZ), respectively in the S&P MidCap 400. Meanwhile, these companies will be shuffled to the S&P SmallCap 600, replacing Methode Electronics (MEI), Chatham Lodging Trust (CLDT), Northfield Bancorp (NFBK), Xperi (XPER), Resources Connection (RGP) and ATN International (ATNI).

Krystal Biotech (KRYS), Virtu Financial (VIRT), StepStone (STEP), Cactus (WHD) and Tidewater (TDW) will replace OraSure Technologies (OSUR), Marcus Corp (MCS), TTEC Holdings (TTEC), Medifast (MED) and Cerence (CRNC), respectively in the S&P SmallCap 600.

ETFs in the Spotlight

SPDR S&P 500 ETF Trust (SPY)

SPDR S&P 500 ETF Trust tracks the S&P 500 Index and holds 503 stocks in its basket, with each accounting for no more than 7% of the assets. It charges investors 9 bps in annual fees and trades in an average daily volume of 53 million shares. SPY has AUM of $534.1 billion and a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 Top Best Performing S&P 500 ETF Stocks of May).

iShares Core S&P 500 ETF (IVV)

With an AUM of $456.7 million, iShares Core S&P 500 ETF is much smaller than SPY and less liquid, trading in an average daily volume of 4 million shares. It charges just 3 bps in annual fees, 6 bps less than the State Street product. iShares Core S&P 500 ETF has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Vanguard S&P 500 ETF (VOO)

Vanguard S&P 500 ETF also directly tracks the S&P 500 Index and holds 504 stocks in its basket. It has amassed $464 billion in its asset base and charges investors 3 bps in annual fees. Vanguard S&P 500 ETF trades in an average daily volume of 4.4 million shares and has a Zacks ETF Rank #1 with a Medium risk outlook.

iShares Core S&P Mid-Cap ETF (IJH)

iShares Core S&P Mid-Cap ETF is the most-popular fund in the mid-cap space, with AUM of $83.2 billion and an average daily volume of 5.5 million shares. It tracks the S&P MidCap 400 Index and holds 406 stocks in its basket. Industrials, financials, consumer discretionary and information technology are the top four sectors with double-digit exposure each. iShares Core S&P Mid-Cap ETF charges 5 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Core S&P Small-Cap ETF (IJR)

iShares Core S&P Small-Cap ETF offers exposure to U.S. small-cap stocks and follows the S&P SmallCap 600 Index. iShares Core S&P Small-Cap ETF holds 681 stocks in its basket, with none accounting for more than 2.1% of the assets. Financials, industrials, consumer discretionary and information technology are the top four sectors with double-digit exposure each. iShares Core S&P Small-Cap ETF is the largest and most popular ETF in the small-cap space, with AUM of $78.4 billion and an average daily volume of 3 million shares. The product charges investors 6 bps in annual fees (read: 5 ETFs Leading the Small-Cap Rally).

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SPDR S&P 500 ETF (SPY): ETF Research Reports

Vanguard S&P 500 ETF (VOO): ETF Research Reports

iShares Core S&P 500 ETF (IVV): ETF Research Reports

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

iShares Core S&P Mid-Cap ETF (IJH): ETF Research Reports

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