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Which stocks will be in and which will be out in the FTSE 100 spring reshuffle?

The FTSE committee will be announcing the results of its first quarterly index review of 2019 on Wednesday. The decision will be based on market capitalisations at Tuesday’s closing prices, and any changes will take effect from Monday 18 March.

As things stand, two FTSE 250 companies are set for promotion to the FTSE 100, with two current blue-chips heading for relegation to the second-tier index. Who are the winners and who are the losers? And should investors be looking to back the rising stars or their out-of-favour counterparts?

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Income buy

Flying FTSE 250 insurer Phoenix Group looks nailed-on for automatic promotion to the top index. Its shares ended last week at 700p, giving it a market capitalisation of a bit above £5bn. According to my sums, this would rank it at 86 in the FTSE 100 — one place below wealth manager St. James’s Place and one place above engineering group Spirax-Sarco.

My Foolish colleague Roland Head has written about the attractions of Phoenix’s business. And with its prospective yield of 7% for 2019, I agree with Roland’s assessment that “the stock rates highly as a pure income buy.”

One I’d avoid

Barring a big drop in its share price before Tuesday’s market close, Phoenix’s automatic entry to the elite 100 is assured. But it’ll be a closer-run thing for engineering and industrial software specialist Aveva Group (LSE: AVV). My calculations say it currently sits bang on the automatic promotion threshold rank of 90.

Many of my fellow Fools have cautioned against this stock, due to its high earnings multiple and low dividend yield. Nevertheless, its share price has continued to rise defiantly, closing on Friday at 3,052p, giving it a market capitalisation of £4.9bn.

I view Aveva as an attractive and well-managed business. However, trading at over 36 times current-year earnings expectations, with a skinny prospective dividend yield of 1.5%, I’m inclined to agree with my colleagues that the sky-high valuation makes it a stock to avoid.

I would buy Wood

If Aveva does join Phoenix in the top index, the two companies in line to be culled are current bottom-ranked FTSE 100 stock John Wood Group (share price 533.4p; market cap £3.6bn) and second-bottom-ranked GVC Holdings (LSE: GVC) (share price 631.5p; market cap £3.7bn).

My fellow Fool Roland Head has written positively about oil services business Wood Group. Trading on a modest forward earnings multiple (10.4 at the current price), with a good prospective dividend yield (5.3%), I certainly see this stock as worthy of a ‘buy’ rating.

My pick of the field

However, my top ‘buy’ is multinational sports betting and gaming group GVC. It owns some of the industry’s leading brands, including sports betting-led brands Ladbrokesbwin, Coral and Sportingbet, as well as games-led brands such as Galapartypoker, PartyCasino and Foxy Bingo.

It has a further revenue stream from providing online gaming services on a business-to-business basis to a number of third-party operators, including MGM in the US, PMU in France and Danske Spil in Denmark.

This is a highly cash-generative business, with a strong record of delivering value for investors through organic growth and acquisitions. Trading on 10.6 times forecast 2019 earnings, with a prospective 5.4% dividend yield, the shares are a snip in my book.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended GVC Holdings. 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.