Canada’s major stock index will add five companies, but remove two, next week as it performs a quarterly rebalancing.
S&P Dow Jones Indices, manager of the S&P/TSX Composite, announced the changes late Friday.
The companies joining the index, before trading opens Dec. 23 on the Toronto Stock Exchange: broadcaster Corus Entertainment Inc.; CT REIT, the real-estate trust that owns Canadian Tire retail locations; vitamin-and-supplement seller Jamieson Wellness Inc.; software company Lightspeed POS Inc. and Real Matters Inc., which offers support services to mortgage lenders.
Gran Tierra Energy Inc. and miner Turquoise Hill Resources Ltd. will be removed.
S&P Dow Jones Indices made no changes to the S&P/TSX 60, which includes most of the largest companie son the TSX.
With the growth of index funds and other passive investing strategies, whether a stock is in or out of a major index can have a meaningful impact on share prices, because many fund managers who track an index need to hold shares in the companies. Canadian stocks added to the index can see a price bump before and even after inclusion.
The composite index, with 230 stocks, is the broader measure of the market and is tracked by more funds. S&P Dow Jones Indices uses “float,” the value of shares that aren’t held by insiders and therefore trade frequently and are easily available to the public, to judge whether a company should be included.
To join, a company’s float-adjusted market capitalization needs to be at least 0.04 per cent, or four-hundredths of a percentage point, of the index. That makes the minimum size of float-adjusted market cap about $900-million. To stay in the composite, a company’s float-adjusted market capitalization must be 0.025 per cent, or 2.5-hundredths of a percentage point, of the total value of the index.
Hundreds of billions of dollars of Canadian mutual-fund and ETF money is tied to either the S&P/TSX Composite Index, or the 60, which is selected from the Composite membership. But while more funds likely track the broader Composite, membership in the 60 can be seen as a proxy for becoming a Canadian blue-chip stock.
In September, S&P Dow Jones Indices added five companies but removed 11. The deletions included a number of energy companies and CannTrust Holdings Inc., the cannabis company whose shares plummeted after it revealed it had grown marijuana without a license.
David Milstead