The Nyquist Small/Mid Cap Index benchmarks the performance of carrier networking oriented companies under $5B in market capitalization. The construction and re-balancing of the index are based on the rules of the Russell 2000 and other Russell indexes, and as such the index is re-balanced at the end of May. Let’s examine the changes.
As a refresher, the Nyquist Index is composed of the 30 largest stocks under $5B market capitalization, selected from a pool of companies in the carrier component, equipment, and wholesale carrier sector. A full description of historical performance, index composition, and index rules can be found on the index home page. The actual index re-balance will not take place until June 27th but the composition is now determined.
The market cap cutoff this year was $365M. Index composition shifted up 7% towards equipment (58.2%) driven by the addition of multiple stocks in this area. Carriers and Components dropped to 12.6% and 29.1%.
The performance of the sector in the last 12 months is nothing short of abysmal. The Nyquist index declined 25% between May 31, 2007 and May 30, 2008. One of the reasons this index was created was to capture the wide fluctuation of this sector vs. the broad market indexes, and the last 12 months are a perfect justification.
There are a few distortions in the index for 2008. Sycamore continues to be over-represented as a result of it’s large cash balance- the enterprise value of the company is negligible. Opnext is similar. Conexant and XO Communications have substantial debt and an enterprise value that would place them solidly in the index. Nortel fell in this year, but would have been to large using the same criteria. No index is perfect.
Finally, Abovenet and Vitesse Semiconductor were not eligible due to a lack of up-to-date financials.
Everyone make a mental note- Nortel is no longer a big-cap stock. The steady erosion (destruction?) of value has made Nortel a mid-cap stock with a market cap of only $4B, making it eligible for inclusion in the Nyquist Index. A year prior Nortel’s market cap was $13B. Nortel becomes the largest component of the Nyquist Index with a 10.5% share.
Entropic and Optium were other eligible IPOs but their market cap placed 31st and 32nd place.
There were no changes as a result of M&A activity. My gut tells me that won’t be the case next year.
Final Index Composition
|Sector||Symbol||Market Cap||% of Index|