Every year the Russell 3000 rebalances the index. This means a bunch of stocks will be added to the index and others will be kicked out.
The day stocks are added to the Russell they get upward pressure as the index buys the shares required to be added to the index.
Stocks that get deleted from the index get a ton of downward pressure — usually short-term for the day — and typically rebound over the next few weeks.
I love this day as it gives fundamental investors a great opportunity to buy into names with downward pressure and allows for a quick flip.
My strategy in the past is to identify names that I know well that have real business models, will generate free cash flow well into the future, and buy into the downward pressure. I then tend to flip these names into a quick profit over the coming weeks.
Here is the entire Russell deletion list of names getting kicked out.
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