Have NASDAQ-100 Rebalance Winners Rallied Too Much?

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The NASDAQ OMX Group Inc. (NASDAQ: NDAQ) announced the results of the annual reranking of the NASDAQ-100 (NASDAQ: NDX). This reranking was effective before the market opened on December 22, 2014.

Three companies were added to the index: American Airlines Group Inc. (NASDAQ: AAL), Electronic Arts Inc. (NASDAQ: EA) and Lam Research Corp. (NASDAQ: LRCX).

24/7 Wall St. has spoken with index fund managers and arbitrageurs over the years to ask for direction and an opinion on what to expect. While exchange traded funds (ETFs) make their adjustments unilaterally at the time of the index changes, the reality is that fund managers who track indexes often move in ahead of, during or after an index changes as they see fit (and within their investment policy guidelines).

American Airlines has seen its shares rally nearly 102% year-to-date. On Monday afternoon, shares were up less than 1% at $51.07. Over the past five days, shares were up less than 1%. The stock has a consensus analyst price target of $60.79 and a 52-week trading range of $24.63 to $51.88. The market cap is $36 billion.

Electronic Arts shares have risen about 107% since the beginning of the year. In Monday midday trading, shares were up less than 1% at $47.77. Also over the past five days, shares rose more than 5% to current prices. The consensus analyst price target is $45.24, and the 52-week trading range is $21.25 to $48.35. The company has a market cap of nearly $15 billion.

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Lam Research shares have had a year-to-date gain of 49%. In the second half of Monday’s trading session, shares were up about 1.5% at $81.77. Over the past five days, shares have only risen about 4%. The consensus price target of $87.19 compares to a 52-week trading range of $48.45 to $85.70. Lam Research has a market cap of $13 billion.

NASDAQ-100 was up less than 0.5% at 4291.36. Over the past five days, the index has risen 3%. The 52-week range on the index is 3,414.11 to 4,347.09.