Of the 283 companies identified as preliminary candidates for deletion from the Russell 3000, nearly half (42%) are computer-related.
Overall, the total market capitalization of companies in the Russell 3000 will decrease about $1.5 trillion from where it stood at this time last year, to about $12.5 trillion, according to Russell.
Russell adjusts the components of its stock indexes once a year to reflect current market capitalization and style attributes for the 3,000 largest US stocks at the end of May. The largest 1,000 companies in the ranking comprise the Russell 1000, while the remaining 2,000 companies become the small-cap Russell 2000 Index.
Final index membership will go into effect July 1 and remain in place for one year. The final rebalanced lists will be available July 9 on www.russell.com.
Nationwide, 73 of the companies on the preliminary deletions list are in the Internet software/services industry, while just 13 such firms are on the additions list.
Russell notes that regional and savings banks as well as companies in oil and gas products, aerospace and defense, industrial machinery and apparel are stepping into the breach. At the same time, 16 real estate investment trusts are on tap to join the indexes as well as seven casino/gaming stocks.
Russell’s index rebalancing process also captures a tilt toward biotechnology firms with 54 of them set for addition to the Russell 3000.
Comings and Goings
Roughly a third (89) of the deletions slated are based in California. Other hard hit states are:
- New York (31 companies)
- Massachusetts (25)
- Texas (18)
- Virginia (16)
Ironically, the states making the largest gains look remarkably consistent, matching 4 of the top 5 deletion leaders. The states leading the gains on the additions list include:
- California (97 companies)
- New York (42)
- Massachusetts (40)
- Texas (39)
- Pennsylvania (25)
Only about 150 initial public offerings will join the newly rebalanced Russell 3000 this year, down from 317 in 2000. However, that’s not much off of 1999’s 179 company representation, or the 183 IPOs added in 1998.
Only about 18 IPOs are likely to join the Russell 1000 Index, the largest companies in the index, down from 86 last year.