Standard & Poor’s announced today that LSB Industries Inc. (NYSE:LXU) will be added to the S&P SmallCap 600 index, and the shares jumped nearly 10% on the news, making the stock one of the top daily gainers on the New York Stock Exchange today.
New index listing invariably raises the age-old question “Is getting listed on a major stock index good for a company or bad?” The answer is: good. The Index Effect exists, it is positive (the median excess return of S&P 500 additions was 3.8% for the past five years). Read “The Shrinking Index Effect” at Standard & Poor’s for the details of the study.
For us investors in alternative energy stocks, the inclusion of LSB Industries in the prestigious small cap index comes as a confirmation that the geothermal heating and cooling market segment is gaining importance, but also that LSB Industries is a recognized leader in the field. Regardless of any lasting Index Effect on the share price, we like what our analysis of the company fundamentals reveals, and technical indicators make LXU a screaming buy.
Disclosure: No positions