(April 17 – 10:00 ET) – The Russell 300 Growth Index returned 20.7% this quarter. That compares with a 1.5% return on the Russell 300 Value Index. “The 19.2% difference between growth and value is the second largest margin between the two indices since Russell began calculating them in 1988,” Paul Carter, research analyst with Russell, said in a press release.
“Only in the fourth quarter of last year did growth stocks perform so much better than value, when the difference was a whopping 44%. In fact, just days before the end of the quarter the return disparity between growth and value was as high as 32%. However, a correction in the technology sector during the final week narrowed the difference.”
The tech sector led the gains of course, although Russell says that in March small cap value actually outperformed growth. “This difference can be attributed in large part to the technology sell-off during the last week of the quarter,” said Carter.
Russell says the gains remain narrow with BCE, Nortel, Ballard, JDS Uniphase, Seagram and Research in Motion accounting for 91% of the TSE 300 composite index’s return in the first quarter of 2000. “This concentration in the Canadian equity markets makes the continued excellent returns of most ‘broad-based’ Canadian market indices deceptive,” said Carter. “For six quarters in a row now, the average stock within the TSE 300 index has underperformed the index, and during the last two quarters, when the index has posted staggering returns, the average stock actually fell in value.”
As a result, the Russell 100, 200 and 300 Value and Growth indices have been reconstituted by ranking the stocks’ book values. As a result of the changes there are now only 199 stocks in the 300 Value portfolio, down from 213. Technology stocks now account for 74.8% of the 300 Growth Index, and Nortel and BCE together account for 58% of it. Resource stock weightings have fallen.
-IE Staff