Carvana, CRH, Comfort Systems to Join S&P 500 in Rebalancing

(Bloomberg) — CRH Plc, Carvana Co. and Comfort Systems USA Inc. were selected for inclusion to the S&P 500.

The companies will join the benchmark in a quarterly rebalance at the end of December, S&P Dow Jones Indices said Friday. The trio will replace LKQ Corp., Solstice Advanced Materials Inc. and Mohawk Industries Inc. prior to the start of trading on Dec. 22.

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Shares of used car-retailer Carvana and building-materials company CRH both jumped more than 7% in post-market trading. Heating and ventilation company Comfort Systems USA rose about 2%.

It’s a milestone for Tempe, Arizona-based Carvana, which has jumped to around $400 per share currently from a 2022 low of less than $4 — a 10,000% gain — as its efforts to cut costs and restructure debt have helped boost earnings. The company said it sold a record of about 156,000 vehicles in the most recent quarter.

The growth of passive investing has elevated the importance of inclusion in the US equity gauge for companies, as funds that track the index boost demand for shares.

Companies must have a market capitalization of at least $22.7 billion and meet profitability, liquidity and share-float standards to qualify for the S&P 500, per guidelines. Expulsion from the benchmark can weigh on stock prices, as index funds sell shares to realign with the S&P 500’s new composition.

Bloomberg Intelligence analysts Wendy Soong and James Seyffart in a note earlier this week predicted that Carvana, CRH and Comfort Systems were good candidates for addition. Following Friday’s announcement, Soong said that Carvana adds sector diversification and matches inclusion criteria. Its shares have risen nearly 100% so far this year.

Upward stock moves based on inclusion announcements tend to be short-lived, said Matt Maley, chief market strategist at Miller Tabak + Co. “Demand jumps significantly, but as soon as a new stock is added, that demand subsides quickly,” he said, adding that the announcements remain significant given the popularity of index-tracking funds.

(Updates with additional information throughout.)

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