3 shares set to be booted from the FTSE 100!

Each quarter, some shares get promoted to the FTSE 100, while others get relegated to the FTSE 250. These three candidates could be next for the axe.

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The FTSE 100 — known as the Footsie — is the UK’s leading stock market index. It tracks the 100 largest companies listed on the London Stock Exchange‘s main market.

Individual share prices within this elite index move up and down, sometimes dramatically. Thus, every quarter, the FTSE 100 and other UK indexes undergo rebalancing.

Promotions and relegations

These index quarterly reviews resemble promotions and relegation in football, such as season-end movements between the English Premier League and the Championship division.

In the previous quarterly review in March, one booming FTSE 250 share was elevated to the large-cap index, while one weak FTSE 100 stock was demoted to the mid-cap index.

In the words of the London Stock Exchange, “The[se] rules-driven, impartial quarterly reviews ensure the indices continue to portray an accurate reflection of the market they represent and form an essential component to the[ir] management”.

Up for the chop?

The last round of added and deleted shares started trading anew on Monday, 18 March 2024. Hence, the next promotions and relations will occur in the second half of June.

These reviews will be based on share prices close to the end of May — and I can already see these three potential candidates for the chop:

CompanyBusinessShare priceMarket value1-year change*5-year change*
St James’s PlaceFinancial advice417.8p£2.3bn-65.6%-63.1%
Ocado GroupOnline grocer346.6p£2.9bn-34.8%-75.2%
RS GroupIndustrial distributor698p£3.3bn-20.7%9.2%
* Excludes cash dividends

For the record, these are the only three FTSE 100 companies with a market value below £3.5bn. My best guess is that companies larger than this will survive the next cut, while those with valuations below £3bn could be in jeopardy of losing their place at the top table.

These three Footsie firms have seen their valuations crash in 2024, sending their share prices towards post-2020 lows. The worst performer of the three over five years is Ocado Group, whose shares have collapsed by over three-quarters in half a decade. Yikes.

From saint to sinner

Barring miracles, St James’s Place (LSE: STJ) looks likely to be booted from the FTSE 100 two months from now. Founded in 1991, St James’s Place advises clients on their financial needs, selling them products and managing their assets.

At its 52-week high, the share price briefly touched 1,245p on 26 April 2023. By 17 April 2024, the stock had plunged to a 52-week low of 393.6p. As I write on 18 April, this business is worth around £2.3bn — maybe a third below what’s needed to stay in the big league.

This firm’s business model — allegedly charging its clients high and opaque charges — has come under attack by the Financial Conduct Authority (FCA). This ongoing review sent its shares plunging in July and October 2023 and again in February 2024.

Of course, this firm might turn things around, winning over the FCA and keeping its clients’ trust (and fees). Nevertheless, this slumping stock is far too risky for my blood.

Finally, it’s early days and perhaps too soon to talk about these three businesses getting axed from the top level. But I’ll be keeping an eye on all three over the next two months!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliff D'Arcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group and RS Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

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