NEW YORK — Shares of Wal-Mart Stores Inc. may be subject to significant volatility as fund managers adjust their portfolios after ratings firm Standard & Poor’s shifts the weighting of the S&P 500 Index, said Deborah Weinswig, retail analyst with Citigroup Smith Barney, in a research report.

The report, which still rates the stock with a “buy/low risk” rating, came as Wal-Mart increased its share repurchasing program.

Wal-Mart’s stock closed Wednesday up 0.4 percent to $53. Its 52-week high is $61.31, and the low is $50.50.

The changes in the S&P 500 involve a “full-float” adjustment, where shares available only for open market trading will be counted in the index. Weinswig predicts Wal-Mart will be the hardest hit of all the S&P 500 companies by the move because its weighting in the index will decrease the most.

Following the change in weighting of the index, Weinswig expects investors to turn over 159 million Wal-Mart shares worth $8.4 billion.

“The company still has millions of shares available for repurchase,” said Weinswig in the report released late Tuesday. “The demand for Wal-Mart stock on the day of the rebalance may exceed supply.”

In Weinswig’s report, she expected Wal-Mart to increase its share repurchase program as a result of the S&P index change. The retailer did just that. Wal-Mart’s board of directors authorized a $10 billion stock buyback program on Wednesday, which replaces the company’s prior $7 billion repurchase program.

In a separate report, Weinswig said she is “encouraged by the announcement, as this sizeable share buyback could more than offset anticipated turnover from the S&P’s move to a free float methodology.”

— Dawn S. Kissi

This story first appeared in the September 30, 2004 issue of WWD. Subscribe Today.