The Timken Company (USA; NYSE: TKR; 5251R9N7) has fallen off Fortune magazine's 2010 list of the 500 largest publicly-traded companies in the U.S.

In 2009, Timken was ranked 431; in 2008 it had been 457th.

Because the Fortune 500 list is determined strictly by the previous fiscal year sales, Timken's decision to divest the last of its Torrington needle roller bearing business to JTEKT/Koyo is the immediate cause of its fall.

Timken's sales in 2009 were $3.1 billion, adjusted for the sale of Torrington operations, giving it a long climb back. The 500th company on the 2010 Fortune 500 roster is Blockbuster, with 2009 sales of $4.16 billion.

While being on the Fortune 500 confers bragging rights and can be a useful marketing tool, many believe its stature is overblown simply because it does not take profitability into consideration.

Moving on or off the Fortune 500 can have a short-term impact on a company's share price. Some investment funds are committed to a simple large-cap market basket of Fortune 500 holdings. Those will be selling off Timken stock for no other reason.

However, as the manufacturing sector continues to improve, many believe those "dumb money" sales are being offset by "smart money" value funds and other tracking funds who are now adding Timken and similar companies to their portfolios. eBearing spoke to an investment manager who pointed out that a loss-riddled company dropping from 10th to 400th would still be in your Fortune 500 portfolio, while a highly profitable company dropping from 500th to 501st would be eliminated.

"Look at Enron," he pointed out, "In 2002, they went from seventh up to fifth on the Fortune 500, and that was after they declared bankruptcy. That same year, Amazon popped onto the list at 492nd. Or look at GM, which ruled for so many years. Would you rather hold Enron or GM or Timken?"

Timken last dropped off the Fortune 500 in 1995, when the list included only manufacturing and industrial companies. It has been back on the Fortune 500 since its 2003 acquisition of Torrington.

2004 article: Timken added to Fortune 500
Compiled annually since 1955, 2010 is the 55th anniversary of the Fortune 500 list. On that first Fortune 500 list, Timken came in at 228th.

Fortune says more than 1,800 companies have appeared on the list. Additions to and deletions from the Index, "do not in any way reflect an opinion on the investment merits of the companies."