Caesars, Penn National Get Big Index Promotion, Heading to S&P 500

Posted on: March 12, 2021, 03:33h. 

Last updated on: June 23, 2021, 01:26h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Caesars Entertainment (NASDAQ:CZR) and Penn National Gaming (NASDAQ:PENN) are trading to the upside in Friday’s after-hours session. That’s on news that the pair of high-flying gaming stocks are heading to the S&P 500.

Caesars S&P 500
Caesars Palace Las Vegas. That company and rival Penn National are joining the S&P 500. (Image: Denise Truscello/National Real Estate Investor)

In a statement issued after the close of US markets today, S&P Dow Jones Indices — curator of the S&P 500 — said Caesars and Penn are two of four stocks joining the widely followed equity gauge. Generac Holdings (NYSE:GNRC) and NXP Semiconductor (NASDAQ:NXPI) are the other two. Of the four stocks departing the index, none are gaming companies.

The changes will be effective prior to the open of trading on Monday, March, 22, 2021 to coincide with the quarterly rebalance,” said S&P Dow Jones in a statement.

Caesars and Penn currently reside in the S&P MidCap 400 Index.

Big Deal for Caesars, Penn Shares

Inclusion in the S&P 500 is a significant promotion for the Harrah’s operator and the regional gaming giant. Simple math explains why this is the case.

The S&P 500 is widely viewed as the premier gauge of domestic large-cap stocks and there is $11.2 trillion benchmarked to the index, according to S&P Dow Jones. While $4.6 trillion of that total is attributable to the market capitalization of index components, that means active fund managers and passive funds direct another $6.6 trillion to index.

Translation: Fund managers and index funds that track the index will dump the aforementioned names that are leaving the S&P 500 and buy shares of the stocks that are joining the benchmark, including the two gaming stocks.

Caesars and Penn National become the fourth and fifth gaming companies to be included in the S&P 500, joining Las Vegas Sands (NYSE:LVS), MGM Resorts International (NYSE:MGM), and Wynn Resorts (NASDAQ:WYNN). LVS was the most recent to be included, entering the index in September 2019.

News of inclusion in the venerable equity barometer extends bullish runs for the Flamingo and Ameristar operators. This week, shares of Caesars gained almost eight percent while Penn surged 20.55 percent on its way to all-time highs earlier today.

That stock is higher by 8.45 percent in after-hours trading, while shares of the Paris operator are up 6.14 percent.

More to Come Later This Year?

Joining the S&P 500 is a coup for any company. It carries an element of prestige and the massive amount of forced buying by active managers and index funds is a boon for the affected stocks.

In the world of equity gauges, it’s hard to match that. But Caesars and Penn may receive another benchmarks boost later this year.

The duo are among several gaming equities that could make the leap to the Nasdaq-100 Index (NDX) when Nasdaq rebalances that barometer in December.