3 Maryland companies join Russell indexes

Creditrust, Radio One, USInternetworking take a bullish step

Securities industry

July 13, 1999|By William Patalon III | William Patalon III,SUN STAFF

The addition of three Maryland companies to closely monitored Russell stock indexes underscores investor recognition of the bullish prospects the companies enjoy, analysts and officials of the companies say.

Baltimore-based Creditrust Corp., Annapolis-based USInternetworking Inc. and Lanham-based Radio One Inc. were among companies added yesterday to one or more of the broad stock indexes created and charted by Frank Russell Co.

One of those, the Russell 2000 index, is the most widely referred to index of small public companies as measured by market value.

"We are very excited about this," said Richard J. Palmer, chief financial officer of Creditrust, which was added to the Russell 2000 and 3000 indexes. "We feel this adds extra depth potential to our effort to create value for our shareholders."

The other two companies joined the Russell 2000.

Being added to an index can give a stock a short-term boost because investors are increasingly turning to "index funds," which mimic the ebbs and flows of overall market averages, or indexes. In contrast, managers of regular funds trade stocks as they try to beat the market, although more than 75 percent fail to do so.

Managers of funds that follow certain indexes over the next few weeks will have to include the newly added stocks in their portfolios. Indexes, including the most well known, the Dow Jones industrial index of 30 companies, are rebalanced or adjusted periodically to reflect changes in the economy or in stock values.

The Russell 2000 consists of small-capitalization companies, and the Russell 3000 is composed of 3,000 large-capitalization companies representing about 98 percent of the investment-grade U.S. stock market.

By making the grade with Russell, a company's "market capitalization" -- its share price multiplied by shares outstanding -- must rank within the designated range, such as the largest 3,000 companies. Market cap is another term for a company's overall market value.

Newly added companies have had appreciating stock prices over time -- the case with Creditrust since it went public last July -- or are newly public and have had good demand for their shares. The latter is true of USInternetworking and Radio One.

Either way, the addition to an index says good things about how investors view the business potential of a company, analysts say.

USInternetworking, for instance, has had good prospects from the beginning. Because of a good business plan and seasoned management, it was able to get $100 million in private financing before the business had any revenue, said Credit Suisse First Boston analyst Mark Wolfenberger. He labels the stock a "buy."

USInternetworking, which manages Internet Web sites for clients, went public in May and has a market capitalization of $1.39 billion.

Radio One, a broadcasting company whose stations target blacks, went public in May. It has market capitalization of about $814 million.

Creditrust, founded in 1991, operated for several years before going public. Its market capitalization is $323.3 million.

Radio One shares closed yesterday at $44.75, down 50 cents; USInternetworking rose 50 cents to $34.25; and Creditrust fell $1.25 to $31.125.

Pub Date: 7/13/99

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.