The latest news item published by an influential financial-services company had a very positive knock-on effect on Hamilton Lane(NASDAQ: HLNE) shares Monday. The stock of the under-the-radar financial-services provider leaped more than 4% higher on the day as a result, easily topping the 1.2% gain of the S&P 500 index.
Index advancement
After market hours on Friday, S&P Global's S&P Dow Jones Indices unit announced the latest set of changes to several of its stock indexes. One of these adjustments propelled Hamilton Lane into the S&P index family, which for many investors and market professionals is the leading group of market indicators.
Specifically, Hamilton Lane is to become a component stock of the S&P MidCap 400 index where it is replacing semiconductor company Wolfspeed. The former is one of six companies joining the mid-cap grouping, only one of which -- Fabrinet -- is advancing from a "lower" index in the family, specifically the S&P SmallCap 600.
S&P Global's index adjustments are made to better align the affected stocks' market-cap figures with their index categories. This current set of changes will take effect before market open on Monday, Sept. 23.
Don't count on a sustained bounce
The so-called "index effect" often occurs in these situations. A company that might not have otherwise been noticed by the market gets a blast of recognition and a bump in legitimacy by being on an S&P index. Since Hamilton Lane wasn't on a lower index immediately before S&P Global's move, some investors consider it a sleeper stock now worthy of attention. However, the index effect often doesn't last, so market players should be cautious with Hamilton Lane in the wake of the news.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global and Wolfspeed. The Motley Fool has a disclosure policy.
