What Does The Russell Reconstitution Mean For You?

The Russell’s mid-year reconstitution is coming soon, and Citi Research released a report this week with their projected changes for the Russell indices, as well as what investors can expect from the changes. Here’s a summary of what Citi had to say.

Size

Citi projects that the high end of the Russell 2000 (R2000) (INDEX: RUT) will move from about $12.3 billion down to $4.3 billion, and the high end of the Mid-Cap Index (Russell Midcap) (INDEX: RMCC) will drop from $38 billion to $29 billion.

Citi is projecting that the R2000 will lose about 28 members to the Mid-Cap Index, including stocks such as JetBlue Airways Corporation (NASDAQ: JBLU), Office Depot Inc (NASDAQ: ODP) and bluebird bio Inc (NASDAQ: BLUE).

The Mid-Cap Index is also expected to lose 15 stocks to the Russell Top 200 (INDEX: RT200), including Netflix, Inc. (NASDAQ: NFLX), Kroger Co (NYSE: KR) and Tesla Motors Inc (NASDAQ: TSLA).

Related Link: 4 Top Value ETFs For Your Portfolio

Falling Stars

Citi is also projecting 11 stocks will fall from the Russell Top 200 Index to the Mid-Cap Index.

Among the companies that will be dropping from the Top 200 are Pioneer Natural Resources (NYSE: PXD), Marathon Oil Corporation (NYSE: MRO), Kellogg Company (NYSE: K) and Sprint Corp (NYSE: S).

Related Link: Benchmarking Smarter Than The S&P 500

Implications

According to Citi’s report, the 28 stocks that are moving from the R2000 to the Mid-Cap Index have accounted for about 28 percent of the 2015 returns in the R2000, despite only making up 6.3 percent of the index’s weight.

“With lesser AUM benched to the Russell Mid-Cap Index vs. the Russell 2000, holders of stocks moving up or down will want to be wary of recon-related buying or selling pressure,” Citi analyst Scott Chronert cautioned.

Image Credit: Public Domain