• The First Cut
  • The Outcasts: Stocks Removed From the S&P 500

    by John Bajkowski

    The Outcasts: Stocks Removed From The S&P 500 Splash image

    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.

    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.

      Market
    Cap
    ($ Mil)
    EPS
    Last
    Fiscal
    Year
    ($)
    EPS
    Est
    Current
    Year
    ($)
    Total
    Liab
    to
    Assets
    (%)
    Price
    Change
    52-Wk
    (%)
    Share
    Price
    (1/16)
    ($)
     
     
     
     
    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
    John Bajkowski is president of AAII.


    Discussion

    No comments have been added yet. Add your thoughts to the discussion!

    You need to log in as a registered AAII user before commenting.
    Create an account

    Log In