It's out with the old and in with the new for the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). The index announced its most recent rebalance for the December quarter on Friday, and a number of gold miners and mining service companies were dropped from the rankings.
Gold mining companies make up three of the seven companies booted from the list of Australia's biggest 200 companies after seeing huge falls in market capitalization in the second half of this year.
Kingsgate Consolidated (ASX: KCN), OceanaGold Corporation (ASX: OGC) and St Barbara (ASX: SBM) have all been pushed out, with shares in the three companies down 80%, 40% and 85%, respectively, in the last 12 months as falling gold prices squeeze profit margins and threaten the viability of some mines with high costs.
In addition to the gold miners, mining service companies have taken a hammering as miners scale back expansion projects and cut costs. Boart Longyear (ASX: BLY) and mobile accommodation provider Fleetwood Corporation (ASX: FWD) have both been forced out.
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Exiting the S&P/ASX 200 Index |
|
|
Company |
12-month share price change |
| St Barbara (SBM) | -85% |
| Kingsgate Consolidated (KCN) | -80% |
| Boart Longyear (BLY) | -78.5% |
| Fleetwood Corporation (FWD) | -71.6% |
| Sundance Resources (SDL) | -67% |
| Cudeco (CDU) | -57% |
| OceanaGold Corporation (OGC) | -40% |
|
Entering the S&P/ASX 200 Index |
|
|
Company |
12-month share price change |
| Slater & Gordon (SGH) | +126% |
| Village Roadshow (VRL) | +100% |
| BC Iron (BCI) | +73% |
| Retail Food Group (RFG) | +55% |
| Virtus Health (VRT) | +43% |
| SkyCity Entertainment (SKC) | +11% |
The mining companies have been replaced with an interesting collection of healthcare, gaming, food and entertainment providers, many of which have had huge share price growth in the last 12 months. Legal service provider Slater & Gordon (ASX: SGH) has rocketed 126%, while film and theme park company Village Roadshow Limited (ASX: VRL) has climbed 100%.
Foolish takeaway
The rebalance is a timely reminder that even though the S&P/ASX 200 Index has risen 14% over the last 12 months, not all companies have been a part of the rising market.
The key to successful long-term investing is to identify those companies that will excel and avoid those with excessive risks. To this end, the most proven path to success is buying great companies with growing earnings at low valuations, a strategy to focus on as we move into 2014.
