American Stock Exchange
has been taking a licking, but the stocks on the exchange seem to be ticking along just fine.
The Amex is the Rodney Dangerfield of stock exchanges, long eclipsed by the Big Board down the street and the Nasdaq floating around in the ether. But investors looking to play the tricky markets of the last few years would have done better buying the Amex Composite than the indices tracking its more successful rivals.
For the year ended in July, the Amex Composite soared 29.4%. By contrast, the
Dow Jones Industrial Average
rose just 23.6%, the
added 15.8% and the broader
Standard & Poor's 500
moved up 12%. Digging back four years, the Amex Composite returned 79% -- more than 70 percentage points better than the Nasdaq and S&P and double the return of the
, an index of smaller stocks.
Some market watchers believe the Amex's outperformance speaks to the market mindset of recent years.
"It makes sense that the Amex composite has rallied, since it tracks small-caps," says Peter Boockvar, equity strategist at Miller Tabak. "And since there is a higher weighting to energy shares, that also explains the outperformance, because energy has been one of the best-performing sectors since 2000."
Indeed, the Amex index is heavy on energy companies, especially Canadian ones. That has boosted its performance as oil and mining shares have soared. Although energy makes up just 9% of the index, these stocks' relative market value weighs in at 32.6%. But Amex's John McGonegal disputes the claim that the rally in the index is purely a function of oil prices.
"There's a lot of great stories on the Amex that don't get told because we specialize in small- and mid-cap companies," says McGonegal, senior vice president of equities at the Amex. "They get overshadowed by bigger names on rival exchanges which might not be as strong performers."
Although the Amex is full of smaller fish, the 600-stock Amex composite index is a surprisingly diversified pond. Health care companies make up the biggest share of listed companies, with 16%, followed by industrials at 15%.
Small and mid-cap dominance since the bursting of the tech bubble has obviously been a boon to the Amex, which provides a home for less weighty companies. The minimum listing requirement for a company on the Amex is a public market value of $3 million and pretax income of $750,000. That compares with $60 million for an IPO over at the NYSE.
Another difference is that profits are not required to list on the Amex if the market cap is more than $15 million.
The less strict standards have allowed the Amex to become a way station for bulletin board companies making the big jump to a larger, more liquid exchange. Or in some cases, it's an arena for fallen angels to recuperate before jumping to a bigger board.
Both scenarios have been playing out lately. Take Canadian Internet provider
, up 30% since moving to the Amex from the bulletin board on Aug. 16. Or check out
( MEK), a data management company that traded on the Nasdaq from 1991 to 2002 before slipping to the bulletin board. It's up 10% since moving to the Amex on Aug. 10.
For his part, McGonegal points to stories like these when talk about the Amex turns to the energy boom.
"To say that energy has bumped it up over the last four years is a stretch -- gold had a good run as well," says McGonegal. "And consumer stocks are 5% of listings yet 24% of market cap -- so they also had a great run too."