Why these 3 ASX shares could be in for a massive boost this month

Also, why there could be more bad news coming for Zip shareholders.

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Outstanding company performance and favourable economic conditions are obviously fantastic for ASX shares.

But occasionally stocks might get a nice boost from an unexpected circumstance.

That's exactly the great fortune Johns Lyng Group Ltd (ASX: JLG), Sayona Mining Ltd (ASX: SYA), and Lovisa Holdings Ltd (ASX: LOV) investors find themselves in this month.

That's because those three ASX shares have been named as new additions to the S&P/ASX 200 Index (ASX: XJO).

They will be welcomed into the flagship index before trading begins on Monday 19 September.

Not just prestige, but actual practical ramifications

So why is joining the ASX 200 such a boon for stocks?

That's because passive funds that follow the index are forced to buy the shares, thereby pushing up demand.

And of course, the share price heads upward as demand increases.

This will be some relief for investors of insurance building repairer Johns Lyng. The price for that stock has dipped 15.5% over the last couple of weeks.

Shareholders for lithium producer Sayona Mining will be glad too, with that stock losing about a third of its value since 19 April.

Lovisa shares have gained a whopping 71% since mid-June, so the ASX 200 addition could light another fire under the rocket.

More to watch

Those three stocks aren't the only ones entering the exclusive 200 club though.

Investors may keep an eye on these other companies to see how they might move as 19 September approaches:

Conversely, for each stock that's added to the ASX 200, one gets removed.

And that's potentially bad news for those companies, as passive funds that follow the index are forced to sell.

When supply increases, the share price dips.

So watch out if you're holding any of these ASX shares, which will be kicked out of the ASX 200 on the morning of 19 September:

Motley Fool contributor Tony Yoo has positions in Johns Lyng Group Limited and Life360, Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended EML Payments, Johns Lyng Group Limited, Life360, Inc., Pointsbet Holdings Ltd, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended EML Payments and SMARTGROUP DEF SET. The Motley Fool Australia has recommended Johns Lyng Group Limited, Lovisa Holdings Ltd, and Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

A group of people gathered around a laptop computer with various expressions of interest, concern and surprise on their faces. All are wearing glasses.
Growth Shares

Turn $300 into significant wealth: 3 explosive ASX opportunities for Aussie investors

Analysts think these shares could be great picks for growth focused investors.

Read more »

Concept image of a businessman riding a bull on an upwards arrow.
Cheap Shares

3 beaten-down ASX 200 shares to consider buying before the next bull market

These shares could be cheap according to analysts. Here's why now they could be a buy.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Dividend Investing

A 5% yield? Here's the dividend forecast for an ASX 200 powerhouse

Are the generous dividends growing or getting smaller? Let's find out.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Dividend Investing

This 10% ASX dividend stock is my top pick for immediate income

This business offers a lot of what income investors are looking for.

Read more »

A happy construction worker or miner holds a fistful of Australian dollar notes.
Dividend Investing

Buy Rio Tinto and these ASX dividend shares in May

Analysts expect good yields from these buy-rated shares.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Dividend Investing

Top broker forecasts this quality ASX 200 dividend share could surge 45%!

A leading broker forecasts outsized gains ahead for this high-yielding ASX 200 dividend stock.

Read more »

Some kids fly a kite in strong winds at sunset.
Cheap Shares

Childcare in focus this Federal Election: how much upside does Macquarie expect for G8 Education shares?

Here’s why a broker is bullish about this stock.

Read more »

A couple sitting in their living room and checking their finances.
Dividend Investing

Beat falling interest rates with these growing ASX dividend shares

Analysts think these shares could be top picks for income investors now interest rates are falling.

Read more »