S&P indices make some changes

Posted Jan 3rd 2007 12:28PM by Zac Bissonnette
Filed under: Newspapers, Indices

The S&P 500 has announced several changes to the index. Ensco International (NYSE:ESV) is replacing BellSouth (NYSE:BLS). Cimarex (NYSE:XEC) will join the S&P Midcap 400. Hornbeck Offshore Services (NYSE:HOS) will join the Small Cap 600.

As the stocks are added to major indices, many index funds will be forced to buy them to stay current with the indices they track. Other "closet index funds" may add them as well. Should you?

If history is any guide, probably not. According to a piece in last week's Wall Street Journal [subscription required]: "... buy stocks that have been removed from the S&P 500. Those that suffered that indignity this year are up 27% on average since removal, while those that were added to the index are up only 1% since joining, notes Paul Hickey of Birinyi Associates."

While there were no stocks demoted in this group (BellSouth is no longer listed as it was acquired by AT&T.), the data would seem to suggest that investors may do well to avoid ESV and possibly HOS and XEC too.

Tags: Bellsouth, BLS, Cimarex, Ensco, ESV, Hornbeck Offshore Services, HOS, index funds, XEC