Latest news with #StevenDeSanctis
CNA
25-06-2025
- Business
- CNA
Palantir's surge to leave its mark on Russell reshuffle
NEW YORK :A meteoric rally in shares of Palantir Technologies is likely to leave its imprint on the final reconstitution by FTSE Russell of its benchmark indexes on Friday, when investors can expect a crush of trading volume heading into the closing bell. Every year, FTSE Russell reconstitutes, or refreshes, the components in its range of indexes, such as the Russell 2000 index of small-cap stocks and Russell 1000 index of large-cap names. Together they make up the Russell 3000 index. There are also style indexes such as the Russell 1000 growth and Russell 2000 value. Friday will be the last time the indexes are reconstituted by FTSE Russell once per year - other than when initial public offerings were added on a quarterly basis. The reshuffle forces fund managers to adjust their portfolios to reflect the new weightings and components. "We do pay attention to it because we own a lot of companies that are on that borderline between being in or out of the Russell 2000," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago. "It does seem to be a positive, obviously, for the companies going into the index and a negative when they're coming out." As Palantir has skyrocketed more than 460 per cent since last year's reconstitution, it is expected to move into the top 200 large-caps names in the Russell 1000, creating a void among the mid cap tech sector. Steven DeSanctis, small- and mid-cap equity strategist at Jefferies Financial Group in New York, anticipates that will create a drop of more than 11.1 per cent for the technology sector in the Russell midcap growth index. In addition, he expects Palantir to see the most selling pressure by dollars from passive managers for the reconstitution. With about $10.6 trillion benchmarked to Russell US indexes, according to FTSE Russell, the final moments before the reconstitution is finalized leads to heightened volume as some investors attempt to take advantage of additional liquidity to exploit any price dislocations. "The fact that we now have non-traditional investors in the small-cap space for a couple of months does provide additional liquidity," said DeSanctis. "So if you wanted to make changes to your portfolio, you have more of an opportunity to do so in the reconstitution's time frame." At last year's reconstitution, Nasdaq said nearly 2.9 billion shares, representing a record $95.257 billion, were executed in its "Closing Cross" in 0.878 seconds across Nasdaq-listed securities, topping the prior record of $80.898 billion in 2021. Melissa Roberts, analyst at Stephens Inc in New York, is estimating a $150 billion net trade this year. While FTSE Russell occasionally makes changes to its methodology for inclusion into its indexes, this year saw little in the way of rule changes, although Russell issued a clarification on its domicile rule. "Companies are starting to have dual headquarters," said Catherine Yoshimoto, director of product management at FTSE Russell. "It's a more recent phenomenon... it's been happening over the years, but it really boils down to needing a clarification because there were enough questions around it." Companies that are now expected to be included in the Russell indexes through a change in their headquarters are Brookfield Asset Management and Restaurant Brands. Companies that are being added to the indexes usually see an increase in demand, but that does not always translate to a rise in prices, or what is known as the "wrong way" when the stock falls. Roberts notes that while the additions to the Russell 1000 are generally seeing a climb in price, the small-cap inclusions to the Russell 2000 have declined. "If everyone kind of has the same idea - there's this liquidity event, I have these liquidity suppliers who are picking up shares to facilitate the Russell trade in the market, I want to force back my position or I want to exit a position," Roberts said.
The Star
25-06-2025
- Business
- The Star
Palantir's surge to leave its mark on Russell reshuffle
NEW YORK (Reuters) -A meteoric rally in shares of Palantir Technologies is likely to leave its imprint on the final reconstitution by FTSE Russell of its benchmark indexes on Friday, when investors can expect a crush of trading volume heading into the closing bell. Every year, FTSE Russell reconstitutes, or refreshes, the components in its range of indexes, such as the Russell 2000 index of small-cap stocks and Russell 1000 index of large-cap names. Together they make up the Russell 3000 index. There are also style indexes such as the Russell 1000 growth and Russell 2000 value. Friday will be the last time the indexes are reconstituted by FTSE Russell once per year - other than when initial public offerings were added on a quarterly basis. The reshuffle forces fund managers to adjust their portfolios to reflect the new weightings and components. "We do pay attention to it because we own a lot of companies that are on that borderline between being in or out of the Russell 2000," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago. "It does seem to be a positive, obviously, for the companies going into the index and a negative when they're coming out." As Palantir has skyrocketed more than 460% since last year's reconstitution, it is expected to move into the top 200 large-caps names in the Russell 1000, creating a void among the mid cap tech sector. Steven DeSanctis, small- and mid-cap equity strategist at Jefferies Financial Group in New York, anticipates that will create a drop of more than 11.1% for the technology sector in the Russell midcap growth index. In addition, he expects Palantir to see the most selling pressure by dollars from passive managers for the reconstitution. With about $10.6 trillion benchmarked to Russell US indexes, according to FTSE Russell, the final moments before the reconstitution is finalized leads to heightened volume as some investors attempt to take advantage of additional liquidity to exploit any price dislocations. "The fact that we now have non-traditional investors in the small-cap space for a couple of months does provide additional liquidity," said DeSanctis. "So if you wanted to make changes to your portfolio, you have more of an opportunity to do so in the reconstitution's time frame." At last year's reconstitution, Nasdaq said nearly 2.9 billion shares, representing a record $95.257 billion, were executed in its "Closing Cross" in 0.878 seconds across Nasdaq-listed securities, topping the prior record of $80.898 billion in 2021. Melissa Roberts, analyst at Stephens Inc in New York, is estimating a $150 billion net trade this year. While FTSE Russell occasionally makes changes to its methodology for inclusion into its indexes, this year saw little in the way of rule changes, although Russell issued a clarification on its domicile rule. "Companies are starting to have dual headquarters," said Catherine Yoshimoto, director of product management at FTSE Russell. "It's a more recent phenomenon... it's been happening over the years, but it really boils down to needing a clarification because there were enough questions around it." Companies that are now expected to be included in the Russell indexes through a change in their headquarters are Brookfield Asset Management and Restaurant Brands. Companies that are being added to the indexes usually see an increase in demand, but that does not always translate to a rise in prices, or what is known as the "wrong way" when the stock falls. Roberts notes that while the additions to the Russell 1000 are generally seeing a climb in price, the small-cap inclusions to the Russell 2000 have declined. "If everyone kind of has the same idea - there's this liquidity event, I have these liquidity suppliers who are picking up shares to facilitate the Russell trade in the market, I want to force back my position or I want to exit a position," Roberts said. "If everyone starts doing that, that's kind of what crowds the trade," she added. (Reporting by Chuck Mikolajczak; Editing by Alden Bentley and Marguerita Choy)
CNBC
28-05-2025
- Business
- CNBC
Jefferies sees upside ahead for these stocks — and they pay solid dividends
With earnings season mostly in the rearview mirror, certain names stand out as winners moving forward, according to Jefferies. The firm recently highlighted several buy-rated stocks of companies that beat on earnings and issued solid guidance. It also favors domestic names over foreign, although international stocks are currently outperforming those in the United States. The iShares MSCI All Country World Index ex U.S. ETF (ACWX) has gained about 14% in 2025, while the S & P 500 is fractionally higher so far this year. However, domestically-oriented names are cheap on an absolute basis, as well as relative to names with foreign exposure, U.S. small-mid cap strategist Steven DeSanctis said in a note Tuesday. "Looking across several macro variables and relative performance of Domestic vs. Foreign, performance favors being domestically oriented," he wrote. The strategist added that if oil prices continue to fall and the dollar remains weak, those factors are favorable for domestic names. While the dollar strengthened for the second day on Wednesday, Jefferies thinks the greenback could be in for an extended period of weakness. These names are among those that made the cut; they are mostly mid-cap companies. They also pay dividends, so investors are paid to wait for the stocks to rise. Lamb Weston has 41% upside to Jefferies' $75 price target, as of Tuesday's close, and it has a 2.78% dividend yield. The company, which makes frozen potato products, posted a beat on both the top and bottom lines when it reported fiscal third-quarter results in April. Adjusted earnings were $1.10 per share, versus the 86 cents per share expected from analysts polled by FactSet. Revenue came in at $1.52 billion versus the $1.49 billion consensus estimate. Lamb Weston also reiterated its guidance for the full year. That was "much needed in our view to stem the negative sentiment," said DeSanctis, who acknowledged the company still faces some headwinds. "LW is now engaged with a strategic advisor to explore value creation and operational/cost saving opportunities after an activist got involved in fall '24, with the value of its integrated assets (notably in the US) possibly attractive to potential suitors," he noted. Shares are down 20% year to date. Virtu Financial , on the other hand, is up more than 15% so far this year. Jefferies' $47 price target implies about 14% upside from Tuesday's close. The high-frequency trading company's first-quarter normalized adjusted earnings were $1.30 per share, topping the $1.20 a share consensus estimate, according to FactSet. The results led Jefferies to increase its estimates for 2025 and 2026 earnings to $4.10 and $4.05 per share, respectively, from $3.74 and $3.78 per share. Elevated volatility and increased retail participation have been key drivers of Virtu Financial's recent earnings strength, as well as the company's growth initiatives, Jefferies analyst Daniel Fannon said in an April note after the company's earnings report. "While the sustainability of activity is always an unknown, the diversity of asset class/product contribution to the performance is notable (this quarter, metals were highlighted for the first time in recent history)," he wrote. "The growth and investor participation within Virtu's underlying markets, such as options, ETFs, crypto, and equity ownership more broadly continue to represent longer-term tailwinds to Virtu's growth outlook." The stock pays a 2.33% dividend yield. Lastly, STAG Industrial has a 4.21% dividend yield and is up nearly 5% so far this year. The real estate investment trust, which focuses on industrial properties in the U.S., has 29% upside to Jefferies' $45 price target, as of Tuesday's close. The company's first-quarter core funds from operations came in at 61 cents per share, 1 cent above the FactSet consensus estimate. Its revenue was $205.6 million, above the $201.1 million expected by analysts. Cash-leashing spreads — which is the difference between money collected on new and renewal leases compared to expiring lease — jumped 27.3%, analyst Jonathan Petersen pointed out in an April 29 note, after the company reported earnings. "We expect leasing spreads will continue to trend positively vs coastal peers over the next few years driven by demand related to onshoring of manufacturing and supply chain reconfiguration," he wrote.
