russell1000_membership_list_2009

Here is the final list, a pdf,  announced today, for the Russell 2000, the 2000 smallest of the 3000 largest cap stocks.

russell2000_membership_list_2009

The following are preliminary additions and deletions as of June 12, 2009.

Final membership lists for the Russell 3000®, Russell 1000®, Russell 2000®, Russell Global, Russell Midcap® and Russell Microcap® will be published June 29, 2009.

The table of additions and deletions is on the next page.

Some of the stocks increased their market caps to be in contention and their per share price went over $1 which is necessary to get into the index. WAVX went from $0.89 to $1.12 HEB went from $0.53 to $1.69 and a market cap of $43 million to $143 million on trading all of the month of May.

This is what I have come up with so far.

Still have to compare betas to know how much of each candidate for inclusion to buy and how much of each candidate for expulsion to sell.

There is $2 trillion dollars in mutual funds and ETFs tracking the Russell 1000 and $870 billion tracking the Russell 2000.  So there is a lot of money rebalancing at the end of June.

Here is a table, from the Barron’s article, of stocks that are not in the Russell 2000 that may be included next month.

Compare this with the bottom of the Russell 2000 as it stands now.

The first two stocks listed on this table are the lowest market cap stocks in the Russell 2000. Eleven and twelve million dollars in market cap, more like micro-caps.

So one way to trade this is to buy the stocks in the first table and short the stocks in the second table.  There are a few issues to think about when doing something like this.

1) You want to pair up the longs and shorts by industry.  That way you are less affected by the overall movement of the sector for the time that you hold the stock.

2) You want to match up the beta of the stocks you are long with the beta of the stocks that you are short.  That will take out the effect of the overall movement of the market.  Beta is the correlation of the stock with the market as a whole.

3) Most funds cannot hold stock that trades for less than a dollar, some will not hold stocks that trade for less than $5.  In the second table I didn’t include stocks that traded for less than $1 except the first two.