2024 Russell Deletions: Industrials

Taking a look at industrials stocks getting kicked out of the Russell indices

This week I took a look at more of the companies getting removed from the Russell indices, this time the focus was on industrials. The Russell 3000 index has about 15 industrials that are getting removed, while the microcap index had over 25, so for now I focused on the deletions from the Russell 3000 list. Like my last post on the consumer defensive stocks, most of these companies getting removed from the index are quite junky. Nearly all of them are trading below book value but are only optically cheap. However I did find one company, Luna Innovations, that does not immediately deserve to go into the trash can.

• Here is a list of companies that have negative equity so they are instantly denied as far as I’m concerned: BW 0.00%↑ , EOSE 0.00%↑ , VATE 0.00%↑ , TSE 0.00%↑

• There were a few companies that have negative gross margins, which is also go into the “no pile”: DNMR 0.00%↑ , DM 0.00%↑ , WKHS 0.00%↑

• Next is a list of companies with routine operating losses that are about the size of their market cap: DFLI 0.00%↑ , SKYX 0.00%↑ , VLD 0.00%↑ , MVST 0.00%↑

• DHX 0.00%↑ is trading slightly below book value, but has slim but positive operating cash profit. The one thing that stood out on their balance sheet is the large amount of goodwill, which means its asset value may be shaky.

• SKIL 0.00%↑ has a market capitalization of $83M and equity value of $182M. The company only has 3 years of financials since it was probably a SPAC. From the financials I could glance at, they have lots of debt and some big goodwill write downs.

• Luna Innovations is a company that offers test and measurement equipment for fiber optic cables. $LUNA is trading slightly above its book value with steady growing revenue, but break even operating profit. The company has $165M of assets, where $100M of current assets and $43M in intangibles. LUNA is one of the few industrial companies that doesn’t have immediate red flags, so I’ll take a closer look.