Large-cap ETF investors may soon see some big tech names in their portfolios as Twitter (NasdaqGS: TWTR) will join the S&P 500 before trading Thursday while Netflix (NasdaqGS: NFLX) will replace Monsanto (NYSE: MON) in the S&P 100.
Monsanto, the agricultural company, is being acquired by German pharmaceutical and chemical conglomerate Bayer AG in a deal expected to be finished soon. Consequently, Standard & Poor’s indices of large-cap companies will need to fill in this soon-to-be vacant slot.
Consequently, S&P said TWTR will soon join the S&P 500 and NFLX will replace Monsanto on the S&P 100.
TWTR Coming to SPY Soon
ETF investors will also see changes in popular large-cap plays, such as the SPDR S&P 500 ETF (NYSEARCA: SPY), which tracks the benchmark S&P 500, and the iShares S&P 100 ETF (NYSEArca: OEF), which follows S&P 100, an index of 100 of the largest stocks with a liquid options market.
Monsanto currently makes up 0.24% of SPY’s underlying portfolio and 0.38% of OEF’s portfolio.
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The move to include Twitter in the S&P 500 is particularly odd since S&P typically waits for a company to produce four straight quarters of positive as-reported profits, but the social media company has only recently revealed its second consecutive profitable quarter after 16 quarters of back-to-back losses.
Daniel Morgan, portfolio manager at Synovus Trust, argued that Twitter’s S&P designation comes after the company showed improvement in user growth and positive trends in advertising revenue, Reuters reported.
“Twitter was always a company on the cusp,” Morgan told Reuters. “The president is on Twitter and all these celebrities, and people follow them, but then you’d look at the numbers on their earnings report, and they always had very flat user growth.”
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