The benchmark S&P 500 index has a new member. Say hello to oil and gas company Concho Resources (NYSE:CXO), which has stepped in to replace specialty real estate investment trust Plum Creek Timber (UNKNOWN:PCL.DL) as an index component.
Plum Creek Timber got the chop because it has been acquired by fellow REIT Weyerhaeuser (NYSE:WY), in a deal worth over $8 billion. Plum Creek Timber owns a swath of timberland across the U.S.; those holdings will complement the acreage controlled by Weyerhaeuser.
The switch took effect on Feb. 19. Concho Resources, which is headquartered in Texas and has assets in the Permian Basin mostly located in that state, will also be included in the S&P 500's oil and gas exploration and production sub-industry index.
Does it matter?
Almost certainly. Now that Concho Resources is slotted into the S&P 500, it'll find its way into exchange-traded funds that dip into the index for their portfolios. The increased demand from these sorts of funds (plus others that like to sniff around high-profile indexes) should help lift and support the stock price.
Although times are tough for oil and gas concerns given the dramatic slide in crude prices since last year, Concho Resources' fundamentals and stock price have actually held up relatively well. The company is still profitable, not very heavily leveraged, and operates in a very attractive region with much potential.
Exiting the index won't have much of an effect on Plum Creek Timber, of course, as it's going to be folded into Weyerhaeuser. The latter company, by the way, is already an S&P 500 component.
Eric Volkman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.