Investments will reconstitute the stocks in the Russell Indexes after the
closing bell today, Friday June 25. For many funds that track Russell’s
indexes this means there will be frantic buying and selling over the coming
Given the turmoil in the market over the past 12 months, analysts are
looking for many familiar stocks to be jettisoned while previously unknown
stocks are cast in the limelight.
Investors are most familiar with the Russell 2000 Small Cap Index (RUT).
The Russell 2000 is the benchmark index for small cap investors. The
Russell 2000 is also considered an important leading indicator for stock
market health, since small cap stocks tend to outperform the broader
market, particularly coming out of recessionary periods.
It’s estimated that around $4 trillion in investment capital is
benchmarked to the Russell Indexes. That means that when the Russell
adds particular stock to their indexes, investment managers who track the
Russell Indices must buy those stocks. This has lead analysts to conclude
that more than a few unknown stocks should see significant share price
appreciation in short order, meaning profits for individual investors
In 2009, stocks that were added to the Russell 2000 small cap index
averaged an 8% gain the day following addition. Many of these stocks went
on to post market-beating gains in the ensuing 12 months.
The SmallCapInvestor PRO advisory service has identified 3 stocks in the
energy, gold and apparel industries that are virtually guaranteed to be
added to the Russell 2000. 50% gains or better are expected for the stocks
included in the Special Report Three Small Cap Candidates for the
Russell Small Cap Index.