Annual Nasdaq 100 Shift May Bring 13 Changes
09 Nov 08:15
By Karen Talley
Of DOW JONES NEWSWIRES
(This story was originally published Thursday.)
NEW YORK (Dow Jones)--This year's shift in the Nasdaq 100 Index is expected
to bring 13 changes to the roster.
The annual shuffle will add those stocks whose market capitalizations will
rank them as the top 100 non-financial Nasdaq stocks. Conversely, those that
will be deleted are the stocks whose market caps have fallen so much they are
no longer considered the biggest 100 stocks.
Steve DeSanctis, market strategist at Prudential Securities, who examined
potential additions and deletions to the index based on market capitalization,
expects six of the anticipated additions to come from the healthcare field,
four from consumer services and three from technology.
The tech sector accounts for 10 of the stocks to be deleted, while two will
come from the utilities sector and one from business services. Despite the
deletion of the tech stocks, the Nasdaq 100 will not lose its standing as a
proxy for technology, as the index is market-cap weighted, meaning its biggest
stocks will remain tech giants like Microsoft (MSFT), Cisco Systems (CSCO) and
Intel (INTC) and their moves will still wield the most influence over how the
index acts.
The list is pretty solid, said DeSanctis, but he is still awaiting a final
counting of outstanding shares as of Nov. 30.
The Nasdaq 100 shuffle is based on Nasdaq stocks' closing prices as of Oct.
31; the final roster is expected to be announced on Dec. 21. The index
represents the 100 largest non-financial Nasdaq stocks, and has become a major
tech benchmark as the value of tech stocks soared over the past few years.
The additions in the healthcare field are expected to be: Cephalon (CEPH),
Invitrogen (IVGN), ImClone Systems (IMCL), Sepracor (SEPR), Icos (ICOS), and
Cytyc (CYTC).
The consumer services additions - which actually have some leaning toward
technology - are anticipated as CWD Computer Centers (CDWC), Apollo Group
(APOL), Express Scripts (ESRX), and Charter Communications (CHTR).
The tech additions are Symantec (SYMC), Semtech (SMTC), and Integrated Device
Technology (IDTI).
The 13 stocks that Prudential Securities expects to be deleted from the
Nasdaq 100 represent a veritable who's who of former tech high flyers.
The anticipated deletions include Broadvision (BVSN) Real Networks (RNWK),
Novell (NOVL), Palm (PALM), Ariba (ARBA), and CNet Networks (CNET). Also
expected to be ousted from the index are 3Com (COMS), CMGI (CMGI) Inktomi
(INKT) and MetroMedia Fiber Network (MFNX).
The tech trouncing may actually extend to all 13 deletions, except that
Prudential Securities categorizes these stocks in a different way. For
instance, two stocks are defined as utilities, although they have leanings
towards telecommunication. The stocks are Level 3 Communications (LVLT) and
McLeodUSA (MCLD).
And XO Communications (XOXO), defined by Prudential as a business service
stock, is also involved in telecom.
The derby of who's in and who's out is considered an important one on Wall
Street, where about $20 billion is indexed to the stocks through an investment
vehicle known as the Nasdaq QQQ, or Triple Q.
The changes to the Nasdaq 100 "feature quite an unusual trend once again this
year," said John Babyak, chief operating officer at WHB/Wolverine Asset
Management. "We're had a lot of stocks falling significantly in dollar value."
Now, "It's good to get rid of some of the dead wood by casting some companies
out and allowing promising additions," Babyak said.
Being added to the index can help give a boost to the stock price, because
money managers who follow the index have to rebalance their portfolio. "Some
stocks will get a pop clearly," said Babyak. "This is a big deal."
Conversely, some analyst look for the deletions to rise as well. Because they
have fallen so far, the reasoning is now might be the time to get in
anticipation of some sort of rebound.
"Stocks that do move into and out of the benchmark may experience some strong
buying and selling pressure leading up to the (Dec. 21) rebalancing and thus
investors may want to know the names ahead of time," DeSanctis of Prudential
said.
There is also the shifting of sectors, but it is decidedly modest given all
the shuffling. While the tech sector is expected to lose at least 10 stocks,
its weighting in the index - because of the still-high market caps for stocks
like Microsoft - only slips 1 percentage point to 70% from 71%. Healthcare's
weighting will rise to an estimated 15% from 14% and consumer services
increases to 7.6%, from 6.7%.
One thing seems to be for sure - the Triple Q has seen a surge in interest
since it was introduced in 1999 - from $650 million in assets, expanding to
$21.6 billion - an increase of more than 3,000% in less than three years.
In fact, the index is ranked in assets among Exchange Traded Funds behind
only the S&P 500 SPDRS, with $26.2 billion tied to them, DeSanctis said.
To be included in the Nasdaq 100, a stock must be a nonfinancial company, it
must have one class of shares, it must have daily trading volume of at least
100,000 shares and must not be in merger-related proceedings.
This year's changes in the index are projected to leave 60 technology
companies, or more than 50% of the overall 100. The change of 13 stocks is the
second highest in the last five years, a testament to the market's plunge which
has sent a lot of former highly regarded stocks tumbling.
The height of the Internet boom, 1999, saw the most stocks added - 15 - but
last year was no slouch, when 12 names were added.
Proposed Stocks Being Added Market Cap
(In Blns)
Apollo Group $4.641
ImClone Systems 4.414
Charter Communications 4.159
Symantec 3.978
CDW Computers 3.956
Sepracor 3.695
Invitrogen 3.235
Express Scripts 3.234
Cephalon 3.158
ICOS 3.097
Cytyc 3.029
Integrated Device Technology 2.925
Semtech 2.655
Proposed Stocks Being Deleted Market Cap
(In Blns)
3Com $1.431
Palm 1.395
Novell 1.282
Real Networks 1.266
RealNetworks 0.915
Ariba 0.853
CNet Networks 0.680
Broadvision 0.568
Inktomi 0.548
CMGI 0.522
McLeodUSA 0.468
Metromedia Fiber Network 0.392
XO Communications 0.298
-By Karen Talley, Dow Jones Newswires, 201-938-5106
karen.talley@dowjones.com
(END) DOW JONES NEWS 11-09-01
08:15 AM |
