Core Insights - Carvana Co. has made a remarkable comeback, transitioning from bankruptcy concerns to being included in the S&P 500 index, with its stock price increasing over 10,000% from 2022 lows [3] - The market reacted positively, with Carvana's stock price reaching a new 52-week high of $456.97 on significant trading volume, indicating strong investor interest and institutional buying [4] Group 1: Market Reaction - Carvana's stock price surged by double digits following the announcement of its inclusion in the S&P 500, reflecting a strong market response [4] - The trading volume exceeded 14 million shares, nearly four times the daily average, highlighting the urgency and interest from investors [4] Group 2: Index Effect - The inclusion in the S&P 500 creates automatic demand for Carvana's shares due to the Index Effect, with an estimated $13 trillion in assets tied to the index [5] - Passive funds and ETFs are mandated to purchase Carvana stock, leading to a significant near-term demand shock [5][6] Group 3: Short Selling Pressure - As of mid-November, over 11 million shares of Carvana were held short, indicating potential pressure on short sellers due to the inelastic demand from index funds [6] - A short squeeze could occur, where short sellers are forced to buy back shares, further driving up the stock price [6] Group 4: Business Transformation - Carvana's addition to the S&P 500 is a result of a fundamental business transformation that has led to sustained profitability and impressive year-over-year revenue growth [7] - The company has shifted its focus from survival to market dominance, supported by a strong balance sheet and clear guidance for continued strong unit sales [7]

Core Insights - SanDisk Corporation has been added to the S&P 500 index, marking a significant milestone for the company less than a year after its separation from Western Digital, indicating a successful return to independence [3][6] - The inclusion has led to a notable increase in SanDisk's stock price and trading volume, driven by the index effect, which mandates passive funds to purchase shares of newly added companies [4][5] Group 1 - SanDisk's stock surged over 13% following the announcement of its inclusion in the S&P 500, reflecting strong market anticipation of institutional demand [5] - The index effect creates a predictable wave of buying from large institutional investors, as passive index funds must acquire shares of newly added companies to maintain accurate tracking of the index [4][5] - SanDisk's strong financial performance, particularly due to demand from the AI sector, has solidified its position as a blue-chip company and enhanced its market credibility [6][7] Group 2 - The criteria for inclusion in the S&P 500 include market capitalization, liquidity, and a history of positive GAAP earnings, which SanDisk has met, affirming its business performance since becoming independent [7]

Group 1 - The "index effect" can temporarily boost a stock's price, as seen with AppLovin's shares rising nearly 5% amid speculation of its potential inclusion in the S&P 500 [1][4] - The S&P 500 index is scheduled for a regular adjustment on June 6, which typically involves swapping out several stocks [2] - Bank of America analysts consider AppLovin a strong candidate for inclusion in the S&P 500, although it is not their top pick [4][5] Group 2 - Bank of America identifies Robinhood Markets as the prime candidate for S&P 500 inclusion, with other stocks like Carvana and Interactive Brokers Group also mentioned as having better chances [5] - The speculation regarding AppLovin's potential index inclusion should not be the sole basis for trading decisions; focus on the company's fundamentals is advised [6]