Getting booted out of the S&P 500 is a mark of shame most companies try to avoid. But it's a harsh possibility several face — and investors should know it is a risk.
Eight stocks in the S&P 500, including information tech firm DXC Technology, Alaska Air and financial Zions Bancorporation, now sport the lowest market values in the index following its latest changes. They're all worth less than $7 billion each. Newell Brands and Lincoln National are both to be removed from the S&P 500 after Sept. 15 as their market values plunged to below $4.5 billion.
And while simply having a low market value isn't grounds for a stock to be booted from the S&P 500, it certainly puts it on the danger list.
Keep Up Or Get Kicked Out
If you're not growing this year in the S&P 500 — you stick out in a bad way.
The collective market value of S&P 500 stocks is up more than 15% or $5.4 trillion this year. That means the mean market value of S&P 500 companies is now $79 billion. Sporting a tiny market cap of $7 billion or less lands you on the very small side of the index. There are companies in the S&P SmallCap and Midcap indexes with larger market values than that.
Tiniest S&P 500 Market Value
Now that Newell Brands and Lincoln National are on their way out of the S&P 500, DXC Technology will become the least valuable stock in the index. Following a more than 20% drop in its value this year, the tech services company is worth just $4.3 billion. That's just marginally more than the $4.1 billion value of Newell Brands.
DXC stands out even more as it's a tiny player amid giants. The most valuable stocks in the S&P 500, worth more than $2 trillion each, are Apple and Microsoft. And investors think DXC Technology's business will contract this year. The company's adjusted profit per share this fiscal year is seen falling more than 8%.
There's also some concern some smaller financials might not be long for the S&P 500 either. Zions Bancorporation's value is down roughly 30% this year to just $5.2 billion. That's only marginally more than Lincoln National's value of $4.4 billion. Analysts think the company's profit will fall more than 20% this year.
Look For Changes
To be sure, none of these S&P 500 stocks are guaranteed to leave the S&P 500. Their shares may rally and lift their value. Or they may simply not be removed. But it's wise to pay attention to stocks at risk of being removed from major indexes. Typically, roughly 20% of the S&P 500 are taken out annually. And so far this year, nine stocks are being given the boot.
And investors don't react well to removals. Shares of Newell and Lincoln National sank 5% just this week on the news of their ejection. You want to own the up-and-coming stocks joining the S&P 500, not the other way around.
Next To Be Booted?
Lowest value S&P 500 stocks
| Company | Ticker | Market value now ($ billions) | Sector |
|---|---|---|---|
| Lincoln National | $4.3 | Financials | |
| DXC Technology | 4.3 | Information Technology | |
| Newell Brands | 4.1 | Consumer Discretionary | |
| Organon | 5.0 | Health Care | |
| Sealed Air | 5.1 | Materials | |
| Alaska Air Group | 5.2 | Industrials | |
| Zions Bancorporation | 5.2 | Financials | |
| Mohawk Industries | 6.1 | Consumer Discretionary | |
| Comerica | 6.1 | Financials | |
| Invesco | 7.0 | Financials |
