How Smaller Companies In Nasdaq100 Like Cisco Would Benefit From Nasdaq100's Special Rebalancing

As the Nasdaq 100 special rebalance will take effect before market opens on July 24.

As the adjustment addresses the overconcentration of companies of heavier weightage, almost half of the index weight currently comprises these heavyweight companies.

Smaller companies often find it challenging to gain visibility and recognition among investors. However, the Nasdaq 100 Special Rebalance provides a unique opportunity for these companies to enhance their growth prospects and elevate their market presence.

In this article, I will be exploring the reasons why smaller companies stand to benefit from the Nasdaq 100 Special Rebalance.

Being included in the Nasdaq 100 index brings unparalleled exposure and visibility to smaller companies. The Nasdaq 100 is one of the most widely followed benchmarks in the financial industry, consisting of the top 100 non-financial companies listed on the Nasdaq stock exchange.

When a smaller company is added to this prestigious index, it receives heightened attention from institutional and retail investors alike, leading to increased trading volumes and improved market liquidity.

The Nasdaq 100 index is renowned for its selection of high-growth companies that drive innovation and technological advancement.

Smaller companies included in this index benefit from the reputation and credibility associated with being recognized as a leader in their respective sectors.

This inclusion instills investor confidence, as being part of such a prestigious index validates a company's growth potential and ability to deliver long-term value.

Using the moving averages, either Simple or Exponential for short term or long term, Cisco (CSCO) have been giving a BUY signal.

With the rebalance and weightage increase, this would further increase investor confidence and interest in this stock.

I have used Parabolic SAR to see how Cisco (CSCO) is currently moving in terms of its stock price.

Looking at the chart below, Cisco (CSCO) might be undergoing a bullish reversal which mean it will be trending upwards, once the rebalance kick in on 24 Jul.

We should be able to see a clearer direction of its stock price.

I will continue to monitor Cisco (CSCO) on how it will be trading prior to rebalance on 24 Jul.

For smaller companies, attracting institutional investment can be a critical milestone in their growth journey. The Nasdaq 100 Special Rebalance acts as a catalyst in this process by attracting the attention of institutional investors, including mutual funds, pension funds, and exchange-traded funds (ETFs).

These institutional investors often have mandates to invest in index-tracking funds, making inclusion in the Nasdaq 100 a prerequisite for investment.

Consequently, smaller companies included in the index benefit from increased institutional ownership, which not only provides capital but also serves as a vote of confidence in their growth prospects.

Inclusion in the Nasdaq 100 index brings forth increased liquidity and trading opportunities for smaller companies.

The index's reputation and widespread recognition attract a larger pool of investors, resulting in higher trading volumes and tighter bid-ask spreads.

This improved liquidity allows smaller companies to execute trades more efficiently, reducing transaction costs and increasing accessibility for both institutional and retail investors.

Being part of the Nasdaq 100 index provides smaller companies with a benchmark against which their performance can be measured.

By comparing their financial and operational metrics with those of other index constituents, smaller companies can assess their relative growth rates, profitability, and market positioning.

This valuable insight enables management teams to identify areas for improvement and refine their strategies, ultimately enhancing their competitiveness in the market.

Cisco (CSCO) currently already garner 8.30% YTD growth, I would expect this to go higher with the weightage increase.

Cisco (CSCO) have also benefitted from the AI implementation as networking is one part that cannot be ignored, whether you are running your workloads on the cloud or physical on-premise deployment.

The rebalance might just be good news for Cisco (CSCO) as its next earning report is scheduled for 16 Aug 23 (which is less than a month from 24 Jul).

And Cisco (CSCO) dividend yield is another good point to consider to hold this stock either short term or long term.

The Nasdaq 100 Special Rebalance offers an array of advantages to smaller companies seeking growth opportunities.

As I have shown under the different factors how Cisco can benefit from the Nasdaq 100 Special Rebalance.

By gaining inclusion in this prestigious index, smaller companies benefit from increased exposure, enhanced investor confidence, access to institutional investment, improved liquidity, and a benchmark for performance comparison.

These benefits collectively contribute to the long-term growth and success of smaller companies, propelling them to new heights in the competitive world of finance and business.

Appreciate if you could share your thoughts in the comment section whether you think Cisco can benefit from Nasdaq 100 rebalance.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.)