What inclusion in the S&P 500 means for a stock
SoFi Technologies (SOFI +1.82%) was passed over for inclusion in the latest round of changes for the S&P 500 (^GSPC +1.18%), but the digital bank may soon meet the technical requirements.
S&P Dow Jones Indices, a division of S&P Global, typically makes changes to the index quarterly, and the next time for new entries is in September. Here’s why SoFi could make it in, and what it means for the stock.
What inclusion in the S&P 500 means for a stock
The S&P 500, as its name implies, is an index of about 500 stocks whose performance is often used as a proxy for the stock market. There are several eligibility requirements, including a market cap of at least $22.7 billion and trailing 12-month profitability, with positive net income in the most recent quarter. However, not every eligible stock will make it in. The people making the decision will often consider features like stock volatility and the balance of industries already included.
Image source: Getty Images.
In the June changeover, Marvell and Flex were both added to the index. Honeywell Aerospace will be added at the end of the month after being spun off from Honeywell International, which will be removed.
When a stock gets included in the index, it benefits in some important ways. Most acutely, it has to be bought by all of the exchange-traded funds (and other funds) that track the index. The largest ETF by far is the Vanguard S&P 500 ETF, which has $1.7 trillion in assets. Vanguard alone has several ETFs that track different categories of the broader index, including growth and value. There are other ETF companies, like State Street and Invesco, that track indexes, too.
In other words, just to stay on track with the S&P 500, large institutional investors will have to buy massive amounts of a stock that was included, and that could give the stock a short-term boost. Longer-term, it indicates confidence in the company’s future and can lead to a more consistent stock performance.
Does SoFi have what it takes?
As of this writing, SoFi’s market cap is $22.2 billion, below the threshold. It has been as high as $38 billion, but it may have been excluded for now because it’s been so close to the cutoff.
SoFi Technologies
Today’s Change
(1.82%) $0.33
Current Price
$18.20
Key Data Points
Market Cap
$23B
Day’s Range
$17.50 – $18.29
52wk Range
$14.92 – $32.73
Volume
2.5K
Avg Vol
70.7M
Gross Margin
61.74%
As for profitability, it has reported positive net income for 10 quarters, with $0.12 in the 2026 first quarter and $0.44 over the trailing 12 months, so it clears that hurdle quite comfortably.
Should you buy it now on the chance that it gets a bump from a possible September inclusion? That wouldn’t be the right reason, and at best, it’s unknown. However, SoFi has a growing and exciting business in long-term financial disruption, and that could be a reason to buy it today.
Jennifer Saibil has positions in SoFi Technologies and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Honeywell International, Marvell Technology, S&P Global, and Vanguard S&P 500 ETF. The Motley Fool recommends Flex. The Motley Fool has a disclosure policy.