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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: A. Edwards who wrote (2091)	12/14/1998 4:35:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 4710

*slightly OT* >VTSS was added to the NASDAQ-100 today comments from thestreet.com; note that this piece doesn't specifically cite VTSS. ----- Nasdaq 100 Metamorphosis By Aaron L. Task Senior Writer Dec. 14, 1998 Meanwhile, the Nasdaq-Amex Market Group today announced changes to the Nasdaq 100 (see table), a measure of the 100 largest nonfinancial stocks that trade on the Nasdaq, and is rebalancing of the index for the first time. Beginning this month, Nasdaq will review the composition of the index on a quarterly basis to ensure that no individual component represents more than 24% of the total market value and/or that the combined weight of all stocks with a weighting of 4.5% or more does not exceed 48% of the total market value of the index. "The rationale behind [the rebalancing] is, three or four companies had grown so much in past five or six years, keeping it as a pure market-cap-valuated index didn't make sense," said Mike Shokouhi, a spokesman for Nasdaq-Amex. "It was lopsided. Through reweighting, it basically reduces the larger end down slightly and increases the weighting of the smaller end slightly." Currently, Microsoft (MSFT:Nasdaq) constitutes almost 24% of the index, Intel (INTC:Nasdaq) more than 14%, Cisco (CSCO:Nasdaq) more than 9%, MCI WorldCom (WCOM:Nasdaq) about 8.5% and Dell (DELL:Nasdaq) 6%. "It looks like they're cleaning up the index, [and] this is long overdue," Prime Charter's Bleier said. "Considering five stocks make up 60% of the [Nasdaq 100], it's not an accurate picture of the companies in the index. For them to eliminate a bunch of companies that have lower market caps is a normal adjustment that S&P does all the time." The heavy weighting of the tech bellwethers helped the Nasdaq 100 rise 69% this year heading into today's trading. Some market players have complained that the big techs also unduly influence the Nasdaq Composite, but Shokouhi declined to comment specifically on whether there are plans to rebalance that index. "The formula, the system they're using to do this can be applied to anything -- a personal portfolio or other indices -- but there hasn't been any talk doing it toward other indices," he said. As far as direct market impact, traders said there appeared to be little. Lipper Analytical Services tracks no funds linked specifically to the Nasdaq 100. "I think it's going to most affect the folks who trade futures" on the Chicago Board Options Exchange, Shokhoui said. "People who hedge one way or another will have to make modifications." Bleier noted the rebalancing may reduce the volatility of the index, which could result in reduced premiums on Nasdaq 100 options. "Every growth fund has to have the big [names] and the Nasdaq 100 is a way to hedge those positions even those there's big premiums," he said.