Photographer: Peter Foley/Bloomberg

New Communication Group Would Be the Fourth Biggest in the S&P 500

The S&P 500’s sleepy telecommunications group is getting revamped with some heavyweight company.

Facebook and Google parent Alphabet are likely to migrate from technology into a new sector that the index’s overseers have said they’ll create next year to replace the telecom bucket, according to a study by Goldman Sachs Group. S&P Global will also tap firms like Walt Disney, Netflix and Comcast for the new group dubbed “communication services,” which will also include traditional telecom companies like AT&T and Verizon. It will have the fourth-biggest weighting among 11 industries. 

All together, communications will make up 10 percent of the S&P 500, taking market share from technology and discretionary. If the changes were made today, the new group would rank between health care and industrials as the fourth largest. Consumer discretionary, which currently includes Disney, would fall to sixth, data compiled by Goldman and Bloomberg show.

While tech’s weight would decline by 4.7 percent points to about 20 percent, it’d remain the largest industry. Discretionary would see its representation shrink by 3.4 percentage points to below 10 percent.

While the new sector will be less sensitive to interest rates and economic data than telecom, the changes in stock classification are unlikely to prompt fund mangers to revise their holdings dramatically, according to Goldman Sachs strategists led by David Kostin.

“The change will spark investor attention but result in little change to fund positioning,” the strategists wrote in a note dated Nov. 17.

S&P said the shuffling will be implemented in September.

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