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Investors Business Daily
Business
MATT KRANTZ

More Than A Third Of S&P 500 Stocks Get Kicked Out In Nine Years

Think you know the world's most-popular index: The S&P 500? It's very different from what it was just nine years ago — and more changes are coming.

Nearly 180 stocks in the S&P 500, or roughly a third of the index, have been replaced since 2015, says data from S&P Dow Jones Indices. Such turnover reflects of just how fast-changing the economy is and how much the index is modified to keep up. The latest changes kicked in Monday with the addition of Blackstone and Airbnb to replace Lincoln National and Newell Brands. They're the ninth changes to the S&P 500 — just this year.

It's also a reminder that the S&P 500 you're buying now is reinvented from the one you bought just nine years ago. And more changes are to come.

"Perhaps more demotions of low-market-cap financials are to come," wrote Wells Fargo analyst Finian O'Shea in a report Tuesday.

S&P 500 Changes Matter To Investors

This week's turnover in the S&P 500 highlights how changes matter to investors.

Shares of Blackstone and Airbnb jumped 3.6% and 7.2%, respectively on Monday following their addition to the S&P 500. For both, joining the big-cap benchmark used by most investors adds pedigree. Both stocks grew so fast they weren't even in the S&P MidCap 400 or S&P SmallCap 600 indexes yet. Jumping into the S&P 500 all of a sudden is like enlisting in the Big Leagues without playing in the Minors first.

And these new additions fit the pattern of investor reaction. The nine S&P 500 stocks added this year — that traded all year — jumped an average of 32% in 2023 so far.

Seeing new S&P 500 companies spring up has been surprisingly common this year, too. Kenvue, the latest addition to the S&P 500 this year in August, is a new spinoff from S&P 500 company Johnson & Johnson. Meanwhile, Palo Alto Networks, Bunge and Insulet, joined the S&P 500 this year without first appearing in the S&P MidCap 400 or S&P SmallCap 600 indexes.

More S&P 500 Change To Come?

Just as the U.S. economy evolves, so too does the S&P 500. Typically, the S&P 500 makes roughly 20 changes in a year. Last year, for instance, 15 changes were made to the S&P 500.

Companies with market values on the low side for a big-cap index start looking suspect for removal. As of the end of August, seven S&P 500 companies sported market values of $6 billion or less. And two of them were just removed Newell Brands and Lincoln National.

Some companies, too, are removed after being bought like Abiomed was in 2022.

If there's one thing for certain about the S&P 500 — it's that it will likely look very different in 10 years than it does now.

This Year's S&P 500 Changes

Action Effective after Symbol Company Sector
ADD 9/15/2023 Blackstone Financials
ADD 9/15/2023 Airbnb Consumer Discretionary
DELETE 9/15/2023 Lincoln National Financials
DELETE 9/15/2023 Newell Brands Consumer Discretionary
ADD 8/24/2023 Kenvue Consumer Staples
DELETE 8/24/2023 Advance Auto Parts Consumer Discretionary
ADD 6/16/2023 Palo Alto Networks Information Technology
DELETE 6/16/2023 DISH Network Communication Services
ADD 5/3/2023 Axon Enterprise Industrials
DELETE 5/3/2023 First Republic Bank Financials
ADD 3/17/2023 Fair Isaac Information Technology
DELETE 3/17/2023 Lumen Technologies Communication Services
ADD 3/14/2023 Bunge Limited Consumer Staples
DELETE 3/14/2023 Signature Bank Financials
ADD 3/14/2023 Insulet Health Care
DELETE 3/14/2023 SVB Financial Group Financials
ADD 1/3/2023 GE HealthCare Technologies Health Care
DELETE 1/3/2023 Vornado Realty Trust Real Estate
Source: S&P Dow Jones Indices
Follow Matt Krantz on Twitter (X) @mattkrantz
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