Retail headwinds, profit warnings, and accompanying stock price falls have pushed retail giant Frasers Group FRAS and under-pressure housebuilder Vistry Group VTY out of the FTSE 100, as well as value retailer B&M European Value Retail SA BME. Wealth manager St James’s Place STJ, hobby stock Games Workshop GAW and investment trust Alliance Witan ALW swapped places with these under-pressure stocks in the blue-chip index.
Frasers Group’s stock price is down 26.19% year to date, with much of the damage occurring over the last six months alone. The company, which founded by Mike Ashley as Sports Direct, is down more than 12% today after it issued a profit warning and slashed its full-year guidance guidance.
Housebuilder Vistry, meanwhile, has suffered a stock price fall of 48.41% in the last six months, after two profit warnings and slashed guidance based in part on concerns over progress in its south of England division.
Vistry Group Stock Price in 2024
Source: Morningstar Direct
Why Do Companies Fall Out The FTSE 100?
These companies will now enter the ranks of the FTSE 250, after their market capitalizations, calculated by multiplying the value of one share by the number of shares available for sale, fell below the threshold at which they can be included in the blue-chip index. To find out more about how this works read more below.
They are joined in the FTSE 250 by other fresh additions in the form of fast food technology platform Deliveroo ROO, sequencing researcher Oxford Nanopore Technologies ONT, commodity miner Ferrexpo FXPO and oil and gas company Diversified Energy Co DEC.
The changes have been confirmed by index administrator FTSE Russell this morning and will take effect at the start of trading on Dec. 23, the beginning of Christmas week.
Which Companies Have Entered The FTSE 100?
Just as companies leave the UK’s top-tier index, however, new joiners arrive, and in this case, return.
St James’s Place, the under-fire wealth manager whose regulatory wranglings led to a share price drop that forced it out of the FTSE 100 earlier this year, is back.
A cost-cutting plan and rising assets under management have helped bolster the company’s share price by as much as 67.79% in the last six months, putting it back into the FTSE 100 and restoring what originally looked like ebbing investor confidence.
Alliance Witan, the investment trust formed from the merger between Alliance Trust and Witan Investment Trust in June this year, is also heading into the FTSE 100. When the two trusts came together, it was the largest such combining of strategies in UK investment trust history. Alliance Witan joins F&C Investment Trust FCIT, which has a Morningstar Medalist Rating of Bronze, and Silver-rated Scottish Mortgage SMT.
Finally: Games Workshop, the fantasy games manufacturer whose share price exploded in the pandemic, has also entered the FTSE 100.
The company has had tougher times since then, with sustained stock price falls in 2021, 2022, and 2023. But the company has enjoyed a very good year in 2024, with shares up 45.20% since January and recently hitting a record high.
SJP’s Comeback: STJ Stock Price in 2024
Source: Morningstar Direct
Why The FTSE Reshuffle Matters
Changes to the UK’s stock market indices give investors an insight into which sectors are in and out of favour, and which companies are on the up or struggling in the big league. They also indicate which companies might be subject of investor shorting. You can read more about the shorting process in our list of most-shorted UK stocks here.
Index provider FTSE Russell changes the constituents of its indices every quarter to reflect changes to Britain’s biggest companies.
Which companies move in and out of the FTSE 100 is based on their total market capitalization at the end of the specified trading day.
To avoid the same borderline companies dropping out and back in every reshuffle, a company must be in the top 90 by market cap to be promoted. Likewise, to be demoted, the firm has to be below the 110th biggest company by size.
Index changes also matter from the perspective of exchange-traded and index funds. Whenever changes are made to underlying indices, FTSE 100, 250 and All Share trackers have to adjust their own constituents to accurately reflect events.
Asset managers also have to do this. They buy and sell stocks to make sure they match the benchmark. And as the FTSE 100 is generally more liquid than other indices, inclusion in an index tends to boost flows into a particular stock. As more money moves into passive funds, index changes become more significant over time.
Greater liquidity means that buy and sell prices tend to be closer together (the bid-offer spread), making it easier for investors big and small to enter and exit positions.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
