This future FTSE 100 inventory seems like a unnecessary danger to me

Coca-Cola Europacific Companions (LSE:CCEP) is about to affix the FTSE 100 in March 2025. With a £37bn market-cap, it’s set to return in at quantity 25 – between Barclays and BAE Techniques.

When it joins the index, the share worth may effectively get a lift. However whereas that’s been catching the eye of some buyers, I’m staying effectively out of the way in which. 

A giant deal

When firms be part of the FTSE 100, there’s normally a big amount of cash chasing after them. Loads of this comes from index funds.

For instance, Video games Workshop‘s set to affix the index afterward 23 December. On that day, funds that monitor the FTSE 100 will purchase a portion of their portfolio in Video games Workshop shares.

Importantly, they gained’t care what worth it’s buying and selling at. So long as they purchase the correct quantity of shares for the dimensions of their fund, they’re doing their job – they’re matching the index. 

Which means there’s more likely to be an unusually excessive stage of shopping for exercise when the agency joins the FTSE 100. In addition to the same old shopping for, there might be demand from index-tracking funds.

Buyers may due to this fact count on the inventory to get a lift when this occurs. However when it comes to market-cap, Coca-Cola Europacific Companions is round eight instances the dimensions of Video games Workshop.

If issues keep as they’re, much more cash’s going to be chasing after the Coca-Cola bottling agency when its inclusion date comes. And buyers may take into consideration shopping for now to get forward.

Keep away

Regardless of the attractiveness of this concept, there are two causes I’m staying out of the way in which. The primary is everybody already is aware of about this and the second is I fear about what occurs subsequent.

The inclusion of Coca-Cola Europacific Companions within the FTSE 100’s already well-known. So buyers have had loads of time to purchase shares prematurely, offsetting the impact subsequent March. Furthermore, the steadiness between patrons and sellers ought to revert again to regular as soon as the inclusion takes place. So I count on any uncommon change within the share worth to be very brief time period. 

From a long-term perspective, I feel the inventory’s really fairly fascinating. The Coca-Cola firm invests closely in advertising behind its manufacturers and the franchisee stands to learn.

The chance of battle between the bottling subsidiary and the mother or father firm can also be restricted. The most important shareholder of Coca-Cola Europacific Companions is the central enterprise.

Anti-obesity medication are arguably a much bigger menace and one which buyers ought to suppose critically about. However I feel they’ve loads of time to think about this earlier than March. 

Possibly later

Warren Buffett factors out that purchasing shares once they first launch on the inventory market is usually a nasty concept. Uncommon pleasure and demand can typically push the value up. 

I feel it’s the identical when a inventory joins a serious index. Coca-Cola Europacific Companions is perhaps a inventory for me sooner or later, however I’m staying out of the way in which whereas it prepares for promotion.

I believe an anticipated surge in shopping for is resulting in buyers attempting to get forward of the sport. As a long-term investor, getting in the course of that appears like a unnecessary danger to me.