And speaking of indices, the forthcoming NASD 100 reshuffle should add a fair amount of biotech. I'm not really happy about that despite the short-term lift it should give the added stocks, because it will further link the biotechs to the NASD.
Here's a Bloomberg article from a few days ago that discusses this:
Nasdaq Reshuffle Will Reduce Technology Presence:
Taking Stock
By Josh P. Hamilton
New York, Oct. 18 (Bloomberg) -- 3Com Inc., Ariba
Inc., CMGI Inc. and other computer- and
Internet-related stocks are likely to be removed from
the Nasdaq 100 Index when it has its annual
adjustment.
Health-care companies such as Cephalon Inc., ImClone
Systems Inc. and Sepracor Inc. will likely make up the
bulk of the replacements in the index, which has
served as a benchmark for large technology companies,
according to Murali Ramaswami, Lehman Brothers Inc.'s
global head of equity derivatives research.
In a report to clients, Ramaswami forecasts the
removal of 16 technology companies from the 100-stock
index when the Nasdaq Stock Market adjusts the
membership in December. Only one of the likely
additions, Symantec Corp., is a computer-related firm.
``It's the end of the more speculative so-called
new-economy era,'' said Donald Selkin, chief market
analyst at Joseph Gunnar & Co. ``It symbolizes the
fact that stocks like Ariba and CMGI are practically
down to zero. These stocks will never again achieve
their market capitalization of a couple years ago.''
Because the Nasdaq 100 is supposed to include the
largest non-financial stocks in the Nasdaq Composite
Index, companies whose market values have surged, such
as pharmacy-benefits provider AdvancePCS and Apollo
Group Inc., owner of the largest for-profit U.S.
university, are most likely to be added.
Firms whose value has plummeted, such as networking-
equipment maker 3Com and Internet-commerce software
maker Ariba, will probably be removed, Ramaswami said.
Software maker Microsoft Corp., the second-largest
company by market value, will remain in the index,
along with other bellwethers such as chipmaker Intel
Corp. and software maker Oracle Corp.
`Less Idiosyncratic'
Still, if the changes go as Ramaswami projects, the
weighting of drug shares in the Nasdaq 100 will rise
to 15.8 percent from 12.9 percent. Computer software
will fall to 23.1 percent from 23.9 percent,
semiconductors to 16.3 percent from 18.5 percent and
computer hardware to 8.8 percent from 9.9 percent.
``The reconstituted index will be less volatile,''
Ramaswami said in an interview. ``It will be less
idiosyncratic or stock specific, and more broad
based.''
While that may reassure some investors, who've seen
the index tumble 72 percent from its March 2000 high,
the changes also will affect the most actively traded
equity issue, the Nasdaq 100 exchange-traded fund,
known as the ``Triple-Q'' for its stock symbol, QQQ.
Exchange-traded funds seek to track the performance of
an index, while trading throughout the day like a
stock. ETFs have become popular because they allow
investors to speculate on the index's direction during
a trading day.
Also, portfolio managers who are prohibited from using
futures and options to bet on a decline in the indexes
can use the ETFs instead.
This year, an average $2.96 billion in QQQ shares have
traded daily, 22 percent more than the second
most-active stock, Microsoft, Lehman data show.
$20 Billion
About $20 billion is invested in QQQs and mutual funds
that benchmark against the Nasdaq 100, Ramaswami said.
Removal from the index is almost certain to pummel the
stocks further, as managers who try to mimic the
Nasdaq 100 dump shares of companies leaving the index
and buy the additions.
Technology shares' reduced weighting in the index may
diminish the QQQ's effectiveness as a tool for
technology investors.
``It won't be so easy to buy a basket of tech stocks
and hedge by selling the QQQs,'' or to buy the QQQs as
a proxy for technology shares, Selkin said.
Ramaswami agrees. The change could lead investors to
increase their use of other technology ETFs, such as
the S&P SPDR Select Technology shares or the iShares
Dow Jones Technology ETF, he said.
Potential Additions to the Nasdaq 100:
AdvancePCS
Apollo Group Inc.
CDW Computer Centers Inc.
Cephalon Inc.
Charter Communications Inc.
Cytyc Corp.
Enbridge Inc.
Express Scripts Inc.
First Health Group Corp.
Icos Corp.
ImClone Systems Inc.
Invitrogen Corp.
Lincare Holdings Inc.
Sepracor Inc.
Sigma-Aldrich Corp.
Symantec Corp.
Potential deletions from the Nasdaq 100:
3Com Corp.
Ariba Inc.
Broadvision Inc.
CMGI Inc.
CNET Networks Inc.
I2 Technologies Inc.
Inktomi Corp.
Level 3 Communications Inc.
McLeodUSA Inc.
Metromedia Fiber Network Inc.
Novell Inc.
Palm Inc.
Parametric Technology Corp.
RealNetworks Inc.
Vitesse Semiconductor Corp.
XO Communications Inc. |
