David,
Good move for you, too (I guess)...
I did some quick research on THDO and RDRT, which were the 2 stocks that Bob was questioning. Not much on THDO, although you can see their 10K over at CBS MarketWatch. RDRT, however, performed as expected, which was that it was expected to be added to the Russell 2000 index today, and apparently it was. Since the price movement was a nearly identical time frame for both THDO and RDRT, I'm going to presume that THDO was also added to the Russell 2000. I'll watch the news releases tonight and see if they cover the additions and deletions.
I did find this older news story on RDRT, covering likely suspects to be added to the Russell.
cbs.marketwatch.com
Investors place bets on small-cap index hopefuls
5/25/2001 12:16:00 PM
05-25 0901 Investors place bets on small-cap index hopefuls
By Thi Nguyen
NEW YORK, May 25 (Reuters) - Early wagers by fund managers on upcoming additions to the
Russell 2000 () index are helping to boost some small stocks.
Beneficiaries include tech small stocks, which are expected to comprise a bigger portion of the
widely watched small company index when investment firm Frank Russell Co. conducts its yearly
rebalancing on June 30.
Shares of likely candidates such as software maker MSC Software Corp. (MNS) have more than
doubled in the last three months, in part anticipating the rally investors have come to expect when a
stock is added to the Russell 2000, fund managers and analysts said.
About $29 billion of investment assets currently mimic the index through index-tracking mutual funds.
More assets are held by managers who use the index as a benchmark for their performance.
Everybody likes to beat the crowd, though. And this year in particular, investors have placed bets on
potential new index members much earlier than usual.
"Some indexers are buying ahead of time and hedge funds are also making bets," said Larry
Baumgartner, a portfolio manager with the One Group Small Cap Value Fund who helps oversee $320
million in stocks.
Investors are eager to avoid the buying spree that occurs as the annual rebalancing draws near.
Typically, stocks added to the Russell 2000 would rise at the rebalancing as index managers buy or
add the shares to mimic the index.
"If we're buying a stock that will be added, or selling something that will be dropped from the index,
we'd try to be faster so we don't have to compete with buying and selling pressures in May and June,"
said Henry Otto, a money manager at Wilmington, Del.-based Brandywine Asset Management Inc.
who helps to manage about $2 billion in institutional small-cap value accounts.
On average, the 480 potential new stocks to be added to the index are up 16.3 percent between
February 28 and May 17 while the proposed deleted list of some 260 companies lost 3.3 percent over
the same period, said Bill Kan, a Merrill Lynch small-cap strategist.
Tech candidate SkillSoft Corp. (SKIL) , a maker of Internet-based training courses and software for
corporations, has nearly doubled in the last three months. StorageNetworks (STOR) , a provider of
data storage management services, is up 26 percent.
Tech's weighting in the Russell 2000 is expected to rise by 5.6 percentage points to about 18
percent, but the total number of tech names will fall from 466 to 437 as many will drop out of the
index in June due to the bear market in tech shares in the past year, Merrill Lynch told clients in an
early May note.
Telecoms and software will be the two largest tech groups to enter the index with 29 and 19 new
names, respectively, while some 113 Internet-related stocks will drop out, according to Merrill Lynch.
Among the approximately 70 new tech names likely to be added to the index are Read-Rite Corp
(RDRT) , Oplink Communications (OPLK) , Avici Systems (AVCI) , and WebEx Communications
(WEBX) , said Carolie Burroughs, a portfolio manager who helps manage about $1 billion in small-cap
equities for Aeltus Investment Management.
Unlike last year when technology became anathema to many investors, small-cap managers said this
year the addition of more tech stocks might help the benchmark's performance.
"After the rally in April, tech stocks are very strong now," said Brandywine's Otto. "I think more tech
will help the performance of the index."
Brandywine has increased its tech weighting to 9 percent from 5 percent at the beginning of the year.
Most of the new additions are semiconductor and equipment stocks like Varian Semiconductor
(VSEA) and Kulicke & Soffa Industries (KLIC) .
Last year, a 3 percent drop in technology's weighting in June helped the index's performance because
it had a much lower weight in technology when tech stocks performed poorly, said analysts.
Money managers guessing at new additions to the Russell 2000 haven't confined themselves to tech
names.
Aeltus' Burroughs said she started adding potential additions to the index early in April, including
women's clothing chain store Christopher & Banks (CHBS) , bakery chain Panera Bread (PNRA) , and
Annaly Mortgage (NLY) , a mortgage real estate investment trust.
The Russell 2000 performed well against all its large-cap counterparts last year. With a 4.2 percent
loss, it beat the large-cap Russell 1000 Index () , which dropped about 8.8 percent. It also
outperformed the Standard & Poor's 500 Index () , which fell 10.1 percent last year, and the Nasdaq
Composite Index () , which lost 39 percent.
So far this year, the Russell 2000 is up 5.4 percent --
better than the losses of 3.4 percent, 3.1 percent and 9
percent in the Russell 1000, the S&P 500 and the Nasdaq,
respectively.
The Russell 2000 shares that have moved up are those to be added to the low end of the Russell
2000, not those to be dropped from the Russell 1000, said One Group's Baumgartner.
Russell 2000 managers' demand for shares of those deleted from the Russell 1000 will be met largely
as Russell 1000 indexers will have to sell off those same shares, he said.
REUTERS
Rtr 12:16 05-25-01 Copyright 2001, Reuters News Service</I<
KJC |
