FTSE 100 reshuffle

The quarterly reshuffle of the FTSE 100 components is upon us. Let’s take a look at the stocks that are likely to be removed and added to the benchmark index. The reshuffle will be effective on Monday 8 September.

Builder working on a house
Source: Bloomberg

Rexam

The company that manufacturers cans for household brands, such as Carlsberg and Pepsi, risks losing its FTSE 100 status despite being one of the original constituents of the index when it was created 30 years ago.

The company’s share price has remained relatively stable in the past two years but now it seems to be stuck in the £4.80-£5.20 range. It would appear that Rexam's inability to match the share price growth of other stocks, rather than a collapse in the value of the company, has put it on the chopping block for demotion. The stock is trading at £5.04, just below the 200-day moving average of £5.07. Relegation from the FTSE 100 could put £4.80 in sight.

Barratt Development

The homebuilder’s share price hit a multi-year high of £4.52 in March, but since then it has dropped back to £3.59. There is fear that the UK property market is overheating and the possibility of an interest rate rise in the next nine months also adds to the decline.

If Barratt Developments joins Bovis Homes, Redrow, Taylor Wimpey and Bellway in the FTSE 250, then Persimmon will be the only homebuilder remaining in the FTSE 100. The 200-DMA of £3.72 is acting as resistance. A demotion could push the stock to the recent low of £3.30.

Direct Line

The insurer is trading at £3.01 and the stock is up 22% year-to-date. The company was spun off from RBS and floated on the London Stock Exchange in October 2012.  It was incorporated into the FTSE 250 in December of the same year. Since going public the stock has gone from £1.75 to £3.01. The stock is receiving support from the 50-DMA of £2.85 and a promotion into the headline index could see the stock target £3.20.

Dixons Carphone

The company is the result of a merger between Dixons and Carphone Warehouse that was completed in August 2014. The deal created a company with over 3000 stores and the aim is to open 30 combined stores (offering all products) by Christmas. The stock received a boost during the week when Vodafone renewed its long-term contract with the company. The announcement drove the share price through the much tested £3.40 level and it went has high as £3.76.

The stock is currently trading at £3.67 and is receiving support at £3.45; a promotion could see £4 in the near-term.

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