The Outcasts: Stocks Removed From the S&P 500
by John Bajkowski
While companies celebrate inclusion into the S&P 500, for every company added, one must be removed. Many analysts have observed an “index effect,” an initial price boost after the announcement of a stock being added as well as a decline for stocks removed for reasons other than a buyout or merger. However, William Hester (www.hussmanfunds.com) observed that when you examine full-year performance, portfolios of stocks removed from the index for reasons other than buyouts outperformed those of added stocks. He points out these neglected and underappreciated stocks may have “more life left in them than most investors expect.”
This issue’s First Cut focuses on firms that have been removed from the S&P 500 index for reasons other than being bought out, taken private, or redomesticated outside the United States. The First Cut listing indicates when and why a stock was removed from the index. Companies must currently have a minimum market capitalization of $3.0 billion for inclusion in the S&P 500. Most companies in the table were removed because they became too small. Some were relocated to other S&P indexes, while others were completely dropped. Hester’s study found that stocks taken out of the S&P 500 and not placed in the MidCap or SmallCap index outperformed those that were relocated. The listing includes the earnings for the most recent year and the consensus estimate for the current fiscal year to measure near-term profitability. The ratio of total liabilities to assets is a simple measure of financial leverage. The 52-week price change highlights recent stock market performance.
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As Hester observed, not all outcast stocks go on to outperform. Some companies subsequently filed for bankruptcy, leaving stock investors with nothing. However, a contrarian may find a few true bargains among these outcasts.
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Market Cap ($ Mil) |
EPS Last Fiscal Year ($) |
EPS Est Current Year ($) |
Total Liab to Assets (%) |
Price Change 52-Wk (%) |
Share Price (1/16) ($) |
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| Company (Exchange: Ticker) | Removed From S&P 500 Index (Reason) | Industry | |||||||
| Liz Claiborne, Inc. (N: LIZ) | 12/1/08 | Moved to S&P SmallCap 600 | 233 | -3.71 | 0.81 | 54.3 | -86 | 2.46 | Apparel/Accessories |
| Ashland Inc. (N: ASH) | 11/13/08 | Moved to S&P MidCap 400 | 630.9 | 2.73 | 1.8 | 44.5 | -76 | 10.01 | Fabricated Plastic & Rubber |
| General Growth Properties (N: GGP) | 11/12/08 | Size | 311.2 | 1.18 | 0.54 | 93.9 | -97 | 1.16 | REIT |
| Unisys Corporation (N: UIS) | 11/10/08 | Size | 340.5 | -0.23 | -0.11 | 89.3 | -73 | 0.94 | Computer Services |
| Terex Corporation (N: TEX) | 11/5/08 | Moved to S&P MidCap 400 | 1420.7 | 5.85 | 5.69 | 64.5 | -70 | 14.97 | Misc. Capital Goods |
| MGIC Investment Corp. (N: MTG) | 10/30/08 | Size | 350.2 | -20.54 | -3.26 | 70.6 | -79 | 2.8 | Insurance (Property & Casualty) |
| Dillard's, Inc. (N: DDS) | 10/21/08 | Size | 302.6 | 0.68 | -0.92 | 58.7 | -74 | 4.12 | Retail (Department & Discount) |
| Wendy's Arby's Group Inc. (N: WEN) | 9/29/08 | Merged & moved to S&P MidCap 400 | 2583.7 | 0.16 | 0.14 | 74.7 | -32 | 5.5 | Restaurants |
| Freddie Mac (N: FRE) | 9/10/08 | Size | 453 | -5.37 | -29.4 | 101.7 | -98 | 0.7 | Consumer Financial Services |
| Fannie Mae (N: FNM) | 9/10/08 | Size | 721.1 | -2.62 | -19.79 | 99 | -98 | 0.67 | Consumer Financial Services |
| IAC/InterActiveCorp (M: IACI) | 8/20/08 | Reorganized into multiple companies | 2125.6 | -1.44 | 0.3 | 18.3 | -29 | 15.14 | Retail (Catalog & Mail Order) |
| HSN, Inc. (M: HSNI) | 8/20/08 | Formerly part of IAC/InterActiveCorp | 290.1 | 1.89 | -3.97 | 39.2 | na | 5.16 | Retail (Catalog & Mail Order) |
| Interval Leisure Group, Inc. (M: IILG) | 8/20/08 | Formerly part of IAC/InterActiveCorp | 327.7 | 1.27 | 1.13 | 85.2 | na | 5.83 | Personal Services |
| Ticketmaster Entertainment (M: TKTM) | 8/20/08 | Formerly part of IAC/InterActiveCorp | 388.5 | 2.35 | 1.43 | 53.3 | na | 6.79 | Retail (Catalog & Mail Order) |
| E.W. Scripps Company (N: SSP) | 6/30/08 | Spun off larger Scripps Networks | 108.2 | -0.1 | 0.92 | 32.6 | -78 | 2.01 | Printing & Publishing |
| OfficeMax Incorporated (N: OMX) | 6/20/08 | Moved to S&P SmallCap 600 | 493 | 2.66 | 1.45 | 80.1 | -66 | 6.49 | Retail (Specialty Non-Apparel) |
| Brunswick Corporation (N: BC) | 6/20/08 | Moved to S&P SmallCap 600 | 274.4 | 0.88 | -1.44 | 63.5 | -79 | 3.13 | Recreational Products |
| Ambac Financial Group (N: ABK) | 6/10/08 | Size | 341.8 | -31.56 | -16.72 | 104.3 | -81 | 1.19 | Insurance (Property & Casualty) |
| Synovus Financial Corp. (N: SNV) | 12/31/07 | Reorganized into TSS & SNV | 1836.6 | 1.04 | -0.32 | 90.2 | -49 | 5.56 | Regional Banks |
| Temple-Inland, Inc. (N: TIN) | 12/28/07 | Reorganized & moved to S&P MidCap | 431.4 | 11.12 | -0.01 | 87 | -76 | 4.05 | Conglomerates |
| NCR Corporation (N: NCR) | 9/28/07 | Moved to S&P MidCap 400 | 2105.1 | 0.94 | 1.64 | 65.9 | -36 | 13.34 | Computer Services |
| Maxim Integrated Products (M: MXIM) | 9/26/07 | Faced delisting | 3875.4 | 0.98 | 0.47 | 14.7 | -41 | 12.26 | Semiconductors |
| PMC-Sierra, Inc. (M: PMCS) | 6/29/07 | Size | 1055.9 | -0.23 | 0.44 | 27.3 | -6 | 4.77 | Semiconductors |
| Sanmina-SCI Corporation (M: SANM) | 6/29/07 | Size | 195.1 | -0.96 | 0.06 | 80.2 | -73 | 0.38 | Electronic Instruments & Controls |
| ADC Telecommunications (M: ADCT) | 6/29/07 | Moved to S&P MidCap 400 | 450.4 | -0.38 | 0.32 | 52.4 | -66 | 4.67 | Communications Equipment |
| Health Management Assoc. (N: HMA) | 3/1/07 | Moved to S&P MidCap 400 | 410 | 0.48 | 0.39 | 94.8 | -69 | 1.68 | Healthcare Facilities |
| Comverse Technology (O: CMVT) | 1/31/07 | Faced delisting | 1343.3 | 0.28 | 0.61 | 38.1 | -56 | 6.65 | Software & Programming |
| Parametric Technology (M: PMTC) | 12/29/06 | Moved to S&P MidCap 400 | 1120.2 | 0.68 | 0.97 | 47.9 | -36 | 9.64 | Software & Programming |
| Navistar International (N: NAV) | 12/19/06 | Faced delisting | 2027.9 | 1.83 | 6.74 | 113 | -43 | 28.47 | Auto & Truck Manufacturers |
| Louisiana-Pacific Corp. (N: LPX) | 11/9/06 | Moved to S&P MidCap 400 | 184.9 | -1.5 | -1.64 | 44.7 | -86 | 1.79 | Forestry & Wood Products |
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Exchange Key: A=American Stock Exchange; M=NASDAQ; N=New York Stock Exchange; O=over the counter. Source: AAII's Stock Investor Pro, Thomson Reuters, and I/B/E/S. Data as of 1/16/2009. |
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