What do Coca-Cola, Brown-Forman, and the Chiron Corporation have in common? They, along with Campbell Soup and Franklin Resources and numerous other companies, are about to lose weight in the S&P 500 Index. That is, their share in the index will shrink after the market close this Friday, according to a spokesman for Standard and Poor’s.

No big deal, you say? Au contraire. With more than a trillion dollars invested in index funds and “closet index funds” that are tied to the S&P, any little shift in the makeup of the index can have a substantial impact on the trading of the shares. It is estimated that over 4% of the shares of each of the companies mentioned above will have to be sold to accommodate the shift in weightings.

Standard and Poor’s announced last September that it was going to re-figure its index to take into account the “float” of the constituent stocks. That is, the total market capitalization is no longer the only criteria for a security’s weighting in the index. Now the number of shares that are freely traded will determine a stock’s position.

So, because insiders own over 40% of Campbell Soup, that company’s stock will have less representation in the index. Consequently, numerous funds will have to sell some of the stock.

As of the close this Friday, the first half of this rebalancing will take place. Already many of the stocks most impacted are recording higher-than-normal trading volume. Several of the stocks traded lower in October, following the announcement by S&P. Many funds have quietly been restructuring their funds in anticipation of the changes. However, some funds will likely rebalance in lockstep with the S&P, and have thus not yet repositioned their portfolios.

A spokesman for S&P singled out the five stocks above as those most impacted by the rebalancing. Other names such as Nike, Kellogg’s, Coors, and Wal-Mart are also on the list to lose ground; in all about 30% of the names in the index will have reduced weightings, but many will see only minute adjustments.

Why this shift? Because the index funds are having a hard time buying representative numbers of shares in closely held firms. Given the explosive growth in index mutual funds and in exchange traded funds, the makeup of the index simply had to change.

There are Wall Street analysts who spend immense time trying to guess which stocks will be added to the S&P 500. When a new stock appears in the index, it almost always trades higher as index funds are forced to load up. Trading desks on the street join in the fun, taking positions in anticipated additions.

They will all be watching to see what impact the rebalancing has on share prices next week. So will we.

Reach Ms.Peek at lpeek@nysun.com.