S&P 500 To Add Berkshire Hathaway

January 27, 2010


Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.B) will enter the roster of securities comprising the S&P 500 and the S&P 100 indexes following its acquisition of Burlington Northern Santa Fe Corp. (NYSE: BNI)

The company will have roughly a 1.1 percent weighting in the S&P 500, which is “simply the proportion its float market cap is of the total index market cap,” David Blitzer, managing director of S&P indexes, said.

Berkshire is one of the largest publicly traded U.S. companies, but it was never included in the S&P 500 before because its shares were not liquid enough, something that has changed with the new 50/1 share split.

The value of the company’s shares rose significantly following the announcement due to increased demand. Typically, when a company is announced for addition to an index, investors rush to buy those securities ahead of expected institution index buying.

Berkshire is a financial sector name, Burlington is an industrial one. But according to Blitzer, the addition of Berkshire to the S&P 500 should not change the nature of the index. On the contrary, the company—post share split—“clearly fits the description” of a nS&P 500 company: “a leading company in leading industries.”

S&P has not announced the date when the change will take effect. Berkshire’s acquisition of Burlington is still pending final approvals, but the deal is expected to close next month.



Find your next ETF

Reset All