After nearly five years since their original index exile, the country's biggest insurer and largest automaker are going mainstream again. Not only will American International Group (AIG) and General Motors (GM) reclaim their places in the the mega-cap S&P 100 index (^OEX), but the Detroit-based car company will also be restored to the S&P 500 (^GSPC) after the close of trading this Thursday.
As my co-host Jeff Macke and I discuss in the attached video, this move not only marks a major u-turn, but also achieves something that few public figures are capable of doing --pulling off a comeback.
But have they?
"Cast rose petals on the ground and trod upon them," Macke jests about the pending reshuffle. "Our nation is reborn."
Of course, the truth lies somewhere in the middle as the government is still in the process of whittling down its remaining stake in GM over the next nine months. You may recall that the AIG divestiture was complete in December after the government sold its last share, netting a cool $2.7 billion profit on some $200 billion in taxpayer-backed loans.
But while the Treasury Department is selling, the average Joe index fund owner will now be buying, as money managers will be compelled to mirror the benchmarks they follow, and increase exposure to two companies which have risen about 60% over the past 12 months.
By way of comparison, AIG is currently worth about $66 billion dollars, which is about the same size as Honeywell (HON), and lands it in the top 60 of mega-caps. For the record, S&P Dow Jones Indexes points out that AIG was never removed from the S&P 500 and has remained a member since 1980.
At $47 billion, General Motors is currently comparable in size to Starbucks (SBUX), and will settle in, approximately, in the 80th spot.
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