Credit Suisse Predictions for Changes to the Nasdaq 100 in December

December 5, 2013 by Lee Jackson

The 2013 annual Nasdaq rebalance occurs on the close Friday December 20 (triple witching date as well as rebalance date for other indices in the U.S.). During this rebalance, the Nasdaq 100 index changes constituents based on market cap. The equity strategy team at Credit Suisse expects Nasdaq to announce official changes on December 13 after the close. The annual ranking of eligible securities uses end-of-October Nasdaq market data and share updates through the end of November.

It is also important to consider that for those six that are added there will be six deletions. Some of those would have to be sold as index portfolio managers make the switch to their holdings. Credit Suisse estimates the gross amount of trading for the rebalance will be $1.2 billion. Since it is market cap based, their predictions may be very close.

Here are the names they expect to be added and deleted.

Illumina Inc. (NASDAQ: ILMN) is a health care name expected to get the call. The company develops, manufactures and markets life science tools and integrated systems for the analysis of genetic variation and biological function in North America, Europe, Latin America, the Asia-Pacific, the Middle East and South Africa. The Thomson/First Call price target for the stock is $89.50. Illumina closed way above that Wednesday at $98.07.

Dish Network Corp. (NASDAQ: DISH) is another top name for inclusion. The company is currently involved in a very contentious bid for the spectrum owned by the now bankrupt LightSquared. The consensus price target for the satellite entertainment company is $52. But Dish closed Wednesday at $53.56.

TripAdvisor Inc. (NASDAQ: TRIP) is thriving as travel has increased over the past couple of years. TripAdvisor branded sites make up the largest travel community in the world, with more than 260 million unique monthly visitors and more than 125 million reviews and opinions covering more than 3.1 million accommodations, restaurants and attractions. The consensus price target for the stock is posted at $80. TripAdvisor closed Wednesday at $85.13.

NXP Semiconductors N.V. (NASDAQ: NXPI) is a tech name expected to get the nod. The company provides mixed signal and standard product solutions for radio frequency (RF), analog, power management, interface, security and digital processing products worldwide. The consensus price target for the European chip company is $48. The stock closed Wednesday at $43.45.

Tractor Supply Co. (NASDAQ: TSCO) has been a hot name this year and is expected to also join the party. The stock was recently touted by CNBC’s Jim Cramer and has been top portfolio manager add in 2013. Investors are paid a small 0.7% dividend. The consensus price target for the stock is $78. Tractor Supply closed Wednesday at $72.72.

LKQ Corp. (NASDAQ: LKQ) wraps up the Credit Suisse list of stocks that may join the Nasdaq 100 this month. The company, together with its subsidiaries, provides replacement parts, components and systems needed to repair vehicles, primarily cars and trucks, in the United States, the United Kingdom, Canada, Mexico and Central America. The consensus price target for the stock is $35. LKQ closed Wednesday at $32.50.

Microchip Technology Inc. (NASDAQ: MCHP) is a tech stock expected to be shown the door. The company recently narrowed its third-quarter fiscal 2014 guidance around the midpoint of its previously guided range to better reflect the market conditions. Investors turned somewhat bearish following the trimmed guidance, and their timing may be good. Investors do receive a solid 3.2% dividend. The consensus price target for the stock is $47. Microchip closed Wednesday at $42.42.

Fossil Group Inc. (NASDAQ: FOSL) may also bid adieu to the Nasdaq 100. Fossil had a great third quarter as evidenced by its results, which far exceeded analysts’ expectations. One of the obvious reasons for its solid performance was that it makes watches and accessories for Michael Kors. Hence, Kors’ higher sales helped Fossil’s revenue grow. The consensus price objective for the stock is a lofty $140. Fossil closed at $122.84.

DENTSPLY International Inc. (NASDAQ: XRAY) is a candidate to leave the index. The company designs, develops, manufactures and markets a range of consumable dental products for the professional dental market worldwide. Investors are paid a tiny 0.5% dividend. The consensus price target for the stock is $48.50, and DENTSPLY closed Wednesday at $47.28.

Sears Holdings Corp. (NASDAQ: SHLD) has had a very difficult year, and removal from the index may be the crowning event. Hedge fund manager Edward Lampert’s efforts to transform the venerable American retailer have been disappointing. Many on Wall Street believe the only real value in the stock is the real estate. The consensus price target is posted at $25. That is far below Wednesday’s closing price of $50.92.

F5 Networks Inc. (NASDAQ: FFIV) is a former tech high flyer that may be leaving the index. The company provides application delivery networking technology that secures and optimizes the delivery of network-based applications and the security, performance and availability of servers and other network resources. The consensus price target for this volatile name is $100. F5 closed Wednesday at $82.81.

Nuance Communications Inc. (NASDAQ: NUAN) may incur more wrath of activist investor Carl Icahn if it is removed from the index. Last week, the diversified conglomerate best known for its speech and translation technology released a disappointing set of fourth-quarter results. The consensus price target for the stock rests at $16.50. Nuance closed Wednesday at $14.15.

Inclusion in the Nasdaq 100 does not mean the stock will skyrocket. Being removed does not always mean a stock will crater either. All of these names are very liquid and will not be radically changed by a pick-up in volume. Many portfolio managers who mirror the index without actually using index products may be inclined to also purchase the new additions. Some short sellers may be inclined to pounce on those removed. Either way, Credit Suisse is at least offering investors a peek behind the curtain.

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