Jeter~
this play may be causing some of the gains. interesting
A series of coming mergers, including International Paper-Union Camp and AT&T-Tele-Communications Inc, are due to close by the end of the current quarter. This will give Standard & Poor's the opportunity to replace up to seven members of the S&P 500.
Which companies will be added? The interest is high among Wall Street pros because of the strong price appreciation enjoyed by several stocks, notably America Online, that were added to the S&P at yearend 1998. These stocks' gains were driven largely by price-insensitive purchases by the giant S&P index funds.
One way to play the index effect is to purchase the largest stocks in the S&P 400 mid-cap index because those issues have a good chance of eventually joining the S&P 500, according to Merrill Lynch's quantitative research group.
The mid-cap index is a kind of farm team for the S&P 500, with its winners often moving up to the big leagues. "In 1998, 25 of the 48 additions to the S&P 500 came from the S&P mid-cap index. And of those 25 mid-cap stocks, 21 were from the top 40," comments Diane Garnick, a Merrill Lynch analyst.
The top 10 stocks in the mid-cap index now are Aflac, Office Depot, BestBuy, Harley-Davidson, Cintas, Linear Technology, Maxim Integrated,
Cadence Design Systems, Lexmark International, and Biogen. Garnick's top choices for inclusion: Cintas and Harley.
|
