Russell rebalancing hits tech stocks
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 2:48 PM ET June 29, 2002
NEW YORK (CBS.MW) -- One-time tech darlings Commerce One and Infospace
are among the companies hit hardest by the annual rebalancing of the small-cap Russell 2000 Index.
The two companies were the most highly valued of 14 stocks removed from the benchmark index as of the market close Friday to make way for larger and more prominent companies. Investment firm Frank Russell Co. rebalances all its indexes, including the Russell 2000, each year at the end of June.
Both stocks hit new all-time lows Friday, as the shares will no longer be required purchases for fund managers who base investment vehicles on the Russell 2000. Commerce One (CMRC: news, chart, profile) shares lost 27 cents, or 42 percent, to close at 38 cents, while Infospace (INSP: news, chart, profile) lost 15 cents, or 27 percent, to 41 cents.
About $25 billion in investment assets are tied to the Russell 2000, according to Frank Russell Co. Many investors use the index to gauge the relative performance of companies valued at less than $1 billion.
In 2000, business software and services companies Commerce One and InfoSpace were included in a book titled, "The 100 Best Internet Stocks to Own for the Long Run," co-authored by Gene Walden, a former investment newsletter editor.
But the stocks of the profitless companies have moved toward zero for the past two years. In December 1999, Commerce One peaked at more than $160 a share. InfoSpace shares reached a height of $130 a share in March 2000.
Analysts aren't projecting rapid improvement for either company. Neither Commerce One nor Infospace is projected to turn a profit for the rest of 2002, or for 2003.
Six other technology companies were also included in the stocks dropped by the Russell 2000: NMS Communications Corp., (NMSS: news, chart, profile), MRV Communications (MRVC: news, chart, profile), TranSwitch Corp.(TXCC: news, chart, profile), Symmetricom (SYMM: news, chart, profile) and Stellent Inc (STEL: news, chart, profile).
Health care and other services companies dominate the list of 14 new companies added to the Russell 2000. They include health-care staffing firm Cross Country Inc. (CCRN: news, chart, profile), K-V Pharmaceutical (KVA: news, chart, profile) and CKE Restaurants (CKR: news, chart, profile), owners of Carl's Jr. and Hardee's franchises.
Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com.