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June marks the Russell indexes’ annual rebalancing season, when companies get added and deleted from the widely followed benchmarks. The addition of several electric-vehicle and autonomous-driving stocks to the Russell 3000 this month illustrates the continued transformation of the auto sector and the growing importance of EV technology.
Among the 15 EV- and AV-related stocks being added are more well-known EV startups, such as electric truck maker Lordstown Motors (ticker: RIDE) and
Fisker
(FSR), whose first product is an SUV dubbed Ocean. There are companies that will supply EV makers, such as battery technology company
QuantumScape
(QS), as well as companies involved in EV infrastructure, such as charging company Beam Global (BEEM).
The Russell 3000 ranks companies by size. Measurements happen in May, and changes are communicated in June. This year’s additions and deletions will occur on June 25.
Getting added to any widely followed index can benefit a stock, including in terms of performance and exposure to a broader base of investors. Most of the EV and AV stocks being added to the Russell 3000 later this month could use the boost: The group of 15 stocks is down 24% year to date on average, trailing far behind comparable gains of the S&P 500 and Dow Jones Industrial Average.
The bevy of EV and self-driving stocks moving up the Russell rankings is another sign that the future of the auto business is in vehicle electrification and higher levels of driver-assistance technology.
The other EV stocks going in include maker of smaller EVs
Arcimoto
(FUV); commercial EV makers
XL Fleet
(XL) and
Hyliion
(HYLN); as well as companies supporting and supplying the EV industry, including
Ideanomics
(IDEX) and
Romeo Power
(RMO).
The two other EV charging stocks being added to the Russell 3000 are
Blink Charging
(BLNK) and
ChargePoint
(CHPT).
Lidar, short for laser-based radar, is a key enabling technology for self-driving vehicles. Four Lidar stocks are going into the Russell 3000: Aeva Technologies (AEVA), Luminar Technologies (LAZR),
Ouster
(OUST), and Velodyne Lidar (VLDR).
Index inclusion can be good for stocks in a few ways. First, it’s a sign a company has hit a size milestone. In this case, the Russell 3000 includes the largest 3,000 or so stocks in the U.S. Market capitalizations in the Russell 3000 range from less than $200 million to more than $2 trillion.
Apple
‘s (AAPL) market cap sits at about $2.1 trillion.
Index inclusion also means fund managers tracking the index, or benchmarking performance against the Russell 3000, will hold shares. More investors buying, selling, and holding any stock is good for liquidity and, potentially, good for valuation multiples.
When there is more demand for anything, even stocks, prices tend to rise.
And inclusion in a Russell index also means stocks are eligible for other Russell Indexes such as growth and value sub indexes.
Companies like to be included—it’s a good bit of news for employees and investors. Take Arcimoto: “Our inclusion on the Russell 2000 and 3000 Indexes is a testament to the extraordinary efforts of the Arcimoto team in the advancement of the Company’s mission,” said CEO
Mark Frohnmayer
in a June 8 news release, adding “2021 is the year Arcimoto will lay the groundwork for its next decade of growth.”
More growth for any of these stocks could lead to their addition to other indexes down the road.
Write to Al Root at [email protected]