Markets & Finance

An Index of Rising Stars


The case for investing in stock indexes is well-known. There's a "safety in numbers" appeal to their diversity and liquidity, and they're more tax-efficient. (Of course, the fact that some indexes have historically outperformed actively managed mutual funds is kind of nice, too.)

For those who invest in individual stocks, knowing that a company is a member of a major stock index can provide some level of comfort, as those issues are generally more liquid and widely traded, vs. the average nonindex stock. As an example, roughly 60% (by market cap) of the S&P 500 is owned by institutions.

Standard & Poor's has a number of well known indexes under its roof, including the large-cap S&P 500, the S&P MidCap 400, and the S&P SmallCap 600. A number of new companies join S&P indexes every year. In this week's screen, we spotlight some names that were added to S&P's market benchmarks in 2003.

Normally, stocks that enter an S&P index exhibit an initial spike in price, followed by some consolidation. The stocks selected here have been in their respective indexes for at least three months, to avoid the initial index effect. In addition, we looked only for issues that are currently ranked 3

STARS or higher by S&P equity analysts. And then we applied one final filter: Each one of them had to have outperformed the S&P 500 index year-to-date through Mar. 22.

Our screen turned up these 13 names:

Recent additions to S&P indexes

Company/ticker

S&P STARS Rank

S&P Index

AMB Property (AMB)

3

400

Boyd Gaming (BYD)

3

400

Commonwealth Telephone (CTCO)

4

600

Electronics Boutique (ELBO)

4

600

Federated Investors (FII)

3

500

Integra Lifesciences (IART)

4

600

Nautilus Group (NLS)

3

600

Prologis (PLD)

3

500

Rent-A-Center (RCII)

3

400

Tractor Supply (TSCO)

3

600

United Dominion Realty (UDR)

4

400

Urban Outfitters (URBN)

4

600

WebEx Communications (WEBX)

3

600

De Guia is an analyst for Standard & Poor's Portfolio Services


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