NEW YORK, Nov 8 (Reuters) - Prudential Securities Inc. on Thursday released its list of potential additions to the widely tracked Nasdaq 100 index, and those likely to be cut when the index is rebalanced in mid December.
Of the 13 stocks Prudential thinks could make the list, six are health-care while 10 technology names are predicted to leave the index, according to Prudential.
Technology, however, will continue to represent the bulk of the highly volatile index with a weighting of about 70 percent representing 60 names, the investment bank said.
"The new index looks just slightly less expensive because we eliminated some of the high-flying tech names and added more health care," said Steven DeSanctis, an equities strategist at Prudential, in a note to clients.
Health-care stocks to be added include ImClone Systems , Sepracor Inc. , Invitrogen Corp. and Cephalon Inc. , according to Prudential.
Tech names that will likely be deleted from the index include Novell Inc. , Palm Inc. , Ariba and CNET Networks , the firm said.
At rebalancing, the index members on average will trade at 42.25 times forward earnings, slightly below the current level of 42.48, said DeSanctis.
The Nasdaq 100 has about $21.6 billion indexed to its performance, and typically, stocks added rise at the rebalancing as index money managers buy so their funds closely mimic its composition. But some investors might place early bets on potential new index members to avoid the buying spree that occurs as the rebalancing draws near.
This year's rebalancing will take place after the close of trading on Dec. 21, said Prudential. Typically, Nasdaq will release the list of additions and deletions in the second week of December.
"Stocks that do move in and out of the benchmark may experience some strong buying and selling pressure leading up to the rebalancing," said DeSanctis.
If Prudential's list is accurate, education stock Apollo Group will see the most buying pressure with some $43 million worth of shares to be bought, while Novell may see the most selling pressure with $33 million worth of stock to be sold, DeSanctis said.
The composition of the index is determined by the Nasdaq Stock Market, based in Washington. For a stock to be selected it must rank among the top 150 stocks on the Nasdaq stock market by market value, have an average daily trading volume of at least 100,000 shares and not be in the financial sector, among other conditions.
The Nasdaq 100 index was first published in January 1985. The Nasdaq 100 has lost 33 percent in 2001, much worse than the Nasdaq Composite index, which fell 24 percent, and the Standard & Poor's 500, which is down 14.4 percent.
Figure 1. Stocks To Be Added To The Nasdaq 100 Index Ticker Name Weight Sector APOL Apollo Group 0.22 Consumer Services IMCL ImClone Systems 0.21 Health Care CHTR Charter Communications 0.19 Consumer Services SYMC Symantec Corp. 0.19 Technology CDWC CDW Computer Centers 0.18 Consumer Services SEPR Sepracor Inc. 0.17 Health Care IVGN Invitrogen Corp. 0.15 Health Care ESRX Express Scripts 0.15 Consumer Services CEPH Cephalon Inc. 0.15 Health Care ICOS ICOS Corp. 0.14 Health Care CYTC CYTYC Corp. 0.14 Health Care IDTI Integrated Device 0.14 Technology SMTC Semtech Corp 0.12 Technology
Figure 2. Stocks To Be Deleted From The Nasdaq 100 Index Ticker Name Weight Sector NOVL Novell Inc. 0.17 Technology PALM Palm Inc. 0.13 Technology LVLT Level 3 Communication 0.09 Utilities RNWK Realnetworks Inc. 0.09 Technology ARBA Ariba Inc. 0.08 Technology CNET CNET Networks 0.08 Technology COMS 3Com Corp. 0.08 Technology BVSN Broadvision Inc. 0.06 Technology CMGI CMGI Inc. 0.06 Technology MFNX Metromedia Fiber Network 0.06 Technology INKT Inktomi Corp. 0.05 Technology MCLD Mcleodusa Inc. 0.04 Utilities XOXO XO Communications 0.04 Business Services Source: FactSet Research Systems; Prudential Securities Inc.