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Shake It Up: Nasdaq 100 Gets Revised

The TaskMaster examines how things look for the index. Plus, another look at the accountability report card.
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SAN FRANCISCO -- Friday evening, those hard-working folks at the

Nasdaq-Amex Market Group

announced the annual revisions to the

Nasdaq 100

, the index which tracks the Nasdaq's 100 biggest nonfinancial constituents (see table).

But size alone doesn't get you into the index. In addition to market cap, the criteria for inclusion include something Nasdaq calls "seasoning," which has nothing to do with paprika (the happiest spice in the world). Rather, a stock must have been listed on the Nasdaq for at least two years (or one year if it's among the top 25 market caps) to merit being added to the NDX.

Thus, recent IPOs such as

Sycamore Networks


did not make the cut, despite sporting a market-cap of around $18.7 billion. Other names which also met the market-cap criteria, according to a recent report by

Merrill Lynch

, but apparently lacked sufficient caraway and/or coriander to be added to the index, include




Exodus Communications

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This strikes me as a bit of reverse ageism by Nasdaq, but I guess youngsters like Sycamore need


to strive for.

While neither




had information on Nasdaq 100 funds, there is apparently some sort of "NDX effect." The gains may not match the blockbuster move



produced when it was added to the

S&P 500

last Wednesday, but the nine names added to the Nasdaq 100 last year outperformed those being deleted by 5.6% during the week of triple-witching expiration, according to Merrill Lynch. The December expiration of index options and futures and stock options occurs this Friday.

Given the growing popularity of the

Nasdaq 100 Trust


, which has grown in assets to $4.65 billion since its inception in March, it's likely this year's adds will generate even greater interest, predicted Diane Garnick, equity derivatives strategist at Merrill.

Today, the names being added rose an average of 3.3%, led by



, which gained 21%. Only three of the 15 names retreated, most notably

i2 Technologies


, down 8.9%.

Speaking of the growing popularity of the QQQs, Merrill Lynch's equity derivatives team noted that trading in the Nasdaq 100 trust outpaced those of

S&P 500 Depositary Receipts


in November by $26.5 billion to $17.4 billion.

The rising prominence of the Nasdaq 100 trust could be one reason S&P added Yahoo! to the hallowed 500 index, a cynical observer (who, me?) might say, and why it may be more apt to consider adding tech names in the future. (


Rhonda Brammer alluded to as much this weekend but was either lacking the data or the chutzpah -- or both -- to come right out and say it. Or maybe she's worried the same finger of skepticism could be pointed at her employer, which recently tried -- with mixed results -- to "soup up" the

Dow Jones Industrial Average








Elliott Shurgin, vice president of index services at

Standard & Poor's

, was unavailable when I called today, but I'm 99.99% sure he would have denied that view.

Meanwhile, I'm sure the fact Yahoo! is popular with investors was certainly secondary to the fact Internet stocks represent a growing portion of the economy. Yet if (as if?) their popularity continues, tech stocks will only grow to represent a bigger piece of the economic pie, thus forcing S&P (and others) to adjust accordingly.

And the vicious (some would say "virtuous") cycle continues, evident again in trading


Accountability, Cont.

Attached below is the latest look at how pundits and prognosticators featured in this column have fared. This time around, I've added my subjective thoughts in the table, because pure quantitative analysis (a.k.a. "numbers") is apparently not enough for some readers.

Fortunately, I was able to catch up with few players featured in this report card. As was the case back on

Oct. 21, Alan Hoffman, senior portfolio manager at

Value Line

, expressed confidence in




"I still think it's selling off for bogus reasons," Hoffman said, even while acknowledging the company may use an "aggressive posture" in its accounting.

Value Line has maintained its long position in Tyco, he said, but has not added to its exposure during the stock's recent weakness.

Hoffman's view is similar to that expressed by many sell-side analysts

last week -- a view that was somewhat vindicated today as Tyco shares rose 2.7% after the company released its annual report, which received the approval of three accounting firms.

Seperately, Charles Payne, president of

Wall Street Strategies

, said he is still recommending



, but has since "traded out of"




Some of the names Payne has recommended more recently in his email service for "active" investors include BroadVision,




NetScout Systems






Finally, Paul Lieberman, an analyst in the equity derivatives research group at

Lehman Brothers

, was unavailable today. But you can see how the tax-loss selling candidates he recommended on

Oct. 25 have performed

here. And remember, the analyst recommended


those names in anticipation of more selling by investors looking to snare tax losses to offset their risers. So the gainers in the table are an anathema to anyone who followed his advice.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at