What Happened?

Shares of civil infrastructure construction company Sterling Infrastructure (NASDAQ:STRL) jumped 6.7% in the morning session after the S&P Dow Jones Indices announced that the company would replace Patterson (which was being acquired) in the S&P SmallCap 600 index before the opening of trading on Thursday, April 17, 2025. 

Being included in the index means that Sterling would likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. 

We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.

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What The Market Is Telling Us

Sterling’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was about 1 month ago when the stock gained 5.4% as the stock rebounded, following a broad-based sell-off the previous day. The Nasdaq was down 4%, while the S&P fell 2.7% as concerns over the ongoing trade war continued to spread. While those concerns didn't exactly disappeared, it's likely some investors looked to take positions in some of the beaten-down stocks, especially some of the high-quality names that got caught up in the sell-off.

Sterling is down 15% since the beginning of the year, and at $142.56 per share, it is trading 28.9% below its 52-week high of $200.56 from January 2025. Investors who bought $1,000 worth of Sterling’s shares 5 years ago would now be looking at an investment worth $17,094.

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