Key Points
It didn’t take very long for space exploration company Firefly Aerospace (NASDAQ: FLY) to become a part of two high-profile stock benchmarks. On Monday, the company graduated to the ranks of both the Russell 2000 and the Russell 3000 indexes. Investors greeted this visibility-improving development by pushing Firefly’s stock up by 16% in that trading session.
Indexed twice
Firefly, which became a publicly traded company in August, announced that morning it was one of 18 companies selected for the Russell 2000 index. Its ascension to that grouping triggered its inclusion in the Russell 3000 index.
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Although the two equity gauges have similar names, their characters differ. The Russell 2000 index is a small-cap listing, while its big brother spreads its net wide, encompassing small-, mid-, and large-cap stocks, to provide a broad overview of the market.
Both indexes are widely known throughout the stock trading world. They were launched over four decades ago, in 1984.
Don’t ignore the fundamentals
In its press release, Firefly didn’t hesitate to mention that the Russell family of indexes “are widely used by investment managers and institutional investors as benchmarks for investment strategies.” They’re also eagerly snapped up by index fund managers and other institutional investors looking for exposure to well-known stock listings.
That said, though, the “index fund effect” tends to be a very ephemeral, news-based pop at best. Ultimately, a stock’s value is more dependent on fundamental performance — so going forward, investors should keep an eye on how Firefly does as a business rather than how impressive it looks on indexes.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.