As part of its rules-based methodology, the index has been reweighted for the third quarter. Microsoft, which has consistently remained one of the highest-weighted stocks in the index since its inception nearly two years ago, is the highest-weighted stock in the index this quarter and receives the largest quarter-over-quarter increase in weighting. MCAM International, the firm whose proprietary algorithms power the CNBC IQ 100, executed the reweighting for CNBC.
The companies in the CNBC IQ 100 Index are weighted according to each one’s ability to invest in, develop, control and deploy intellectual property to achieve strategic advantage over competitors. Companies with the highest weighting maintain this type of advantage across multiple industries.
Microsoft shares gained about 16 percent in the first half of the year. It is one of about five major tech stocks that has helped keep the S&P 500 in positive territory so far in 2018. The increase in weighting for Microsoft comes at the expense of semiconductor makers Micron and Intel. MCAM said the semiconductor industry is likely to face pressure from trade tensions with China in the coming months, and its algorithms that select and weight the IQ 100 index components are anticipating that pressure.
The index is reweighted quarterly, and components are rebalanced annually. In addition to the reweighting, Boston Scientific has been added to the index for the remainder of the year as a result of Monsanto’s May merger with Bayer. Monsanto had been an IQ 100 component for the first half of the year. According to the index methodology, replacements for component companies removed due to a corporate action are added at the start of the next new quarter.
Boston Scientific shares are up more than 33 percent year-to-date. They spiked in June following rumors that the company would be acquired by Stryker, another component of the IQ 100. Stryker quashed the rumors in a regulatory filing two days after the Wall Street Journal reported news of a potential deal.
Boston Scientific enters the index as the second-highest-weighted company, behind Microsoft. Apple, Boeing and Baker Hughes GE round out the top five highest-weighted companies in the index this quarter.