The NRW Holdings Ltd (ASX: NWH) share price has rocketed 6% higher this morning after an announcement stating it will enter the S&P/ASX200 Index (ASX: XJO) effective 3 May 2019.
Why is NRW Holdings climbing into the S&P/ASX200?
S&P Dow Jones Indices announced that it will remove Trade Me Group (ASX: TME) from the S&P/ASX200 as a result of the scheme of arrangement whereby the company will be acquired by Titan AcquisitionCo New Zealand Ltd.
What's been happening for NRW?
The NRW share price has climbed more than 75% higher so far this year and hit a new 52-week high this morning on the news it would move into the ASX200 on the expectation of greater coverage and more focus on the stock which should boost trading volume and liquidity.
NRW's equity performance so far this year has followed an industry-wide trend that has seen the share prices of peers WorleyParsons Ltd (ASX: WOR) and Seven Group Holdings Ltd (ASX: SVW) also rebound strongly from a poor end to 2018.
Many of Australia's biggest engineering companies saw big drops in their equity after some headline-grabbing stories including Lendlease Group Ltd (ASX: LLC) scrapping a planned bond issuance and writing down its engineering division by $350 million.
Should you buy NRW shares?
I'm not particularly bullish on EPCM contractors at this point in the cycle, particularly given the potential for project cost overruns and high degree of leverage involved.
With increasing competition among EPCM contractors, the bidding prices of contracts can be reduced and result in tight profit margins based on assumptions that may not hold in periods of stress.
At this point in the cycle, I'll instead be looking to invest in the Aussie tech stocks such as Afterpay Touch Group Ltd (ASX: APT), particularly given the fintech's share price declines in recent days could make it cheap.
For those who want to look elsewhere for growth, this top-rated stock could boost portfolio gains as it continues to soar in a $22 billion industry.
