S&P 500 index fund holders are about to become Internet stock investors--whether they want to or not.
America Online Inc., the No. 1 online service, will replace Venator Group Inc. in the Standard & Poor's 500 effective after the close of trading Dec. 31, S&P said Tuesday. The company had passed over AOL, along with other zooming Net stocks such as Yahoo, in rejiggering the index several times recently.
Internet-related companies have been among this year's best stock performers, and the industry has experienced explosive growth in the last few years. The blue-chip index, the benchmark against which many professional money managers are judged, contained no Internet stocks until now.
AOL, with a market capitalization of $63 billion, will be larger than all but 38 of the companies in the S&P 500. Venator, formerly Woolworth Corp., is an athletic shoe and clothing retailer with a market capitalization of $924 million.
Companies typically see their shares rise when they join the S&P 500 because mutual funds that try to imitate the performance of the index must buy the shares. About $626 billion is invested in portfolios that try to match the index, S&P said.
AOL's stock has risen sixfold this year, while Venator's has lost 67% of its value. In after-hours trading Tuesday, AOL shares rose $21 to $138 on the New York Stock Exchange.
S&P said Concord EFS Inc. will replace America Online in the S&P MidCap 400 index.