Google and Red Hat added to Nasdaq

Rob writes "Google Inc and Red Hat Inc are two of the big technology-related stocks to be added to the Nasdaq-100 in the latest annual reordering of the 100 largest non-financial stocks on the Nasdaq stock market. Meanwhile, the addition of Raleigh, North Carolina-based Red Hat reinforces the credentials of the open source Linux operating system on which the company has built its business. "

Comments

Nasdaq /= Nasdaq-100

[richmaine]

The subject line really surprised me, as I was sure that those stcoks had been on Nasdaq since they went public. (Pretty much everything is on Nasdaq). I guess I should have known better than to trust a slashdot subject line. The Nasdaq-100 is not the same thing as the Nasdaq.

Sort of reminds me of all the management types here at work who don't know that ISO means anything other than ISO 9000.

Indexes and exchanges

[jfengel]

Well, I wouldn't say "everything" is on the NASDAQ. NASDAQ is one of the major stock exchanges in the US; the biggest and oldest one is the New York Stock Exchange. A particular stock is usually traded only on one exchange. NASDAQ is heavy on tech stocks, and NYSE is heavy on older, more blue-chip kinds of companies. Most of the companies that affect Slashdot are listed on the NASDAQ, but for most of history it's the NYSE that's been considered the more important index.

The NASDAQ 100 is an index; that is, it's a number designed to tell you how the NASDAQ as a whole is doing. The most famous index is the Dow Jones Industrial Average; when people say "the market is up" they usually mean the Dow.

The Dow is designed to track big old industrial companies like steel, sugar, and railroads. They're "blue chips", meaning they turn in reliable, consistent profits, and are thus supposed to be a good measure of the overall long-term health of the economy. It's heavy on NYSE companies, though NASDAQ companies are gradually creeping their way onto it.

Re:Indexes and exchanges

[birge]

Well, you're right about informing us that the NASDAQ is a stock market. Thanks for that bit of advice. But I think the rest you have a bit wrong. The DOW is not really considered a proxy for the market, just large-cap industry. The S&P 500 is more considered the 'market'. The NASDAQ 100 isn't the NASDAQ index. When people say the NASDAQ hit 2500, they mean the NASDAQ composite, not the 100. The 100 is an index of the largest stocks in the NASDAQ, that's all.

Who loses

[jfengel]

You don't just add companies to the NASDAQ 100. You also have to drop them. The losers this time:

Career Education Corp.
Dollar Tree Stores Inc.
Intersil Corp.
Invitrogen Corp
Level 3 Communications Inc.
Millennium Pharmaceuticals Inc.
Molex Inc.
Novellus Systems Inc.
QLogic Corp.
Sanmina-SCI Corp.
Synopsys Inc.
Smurfit-Stone Container Corp.

I've never heard of most of these companies. And that's one of the problems with the NASDAQ 100 as an index. Its contents change often, to drop losers and reward winners. Which means that the NASDAQ 100 is constantly rising as long as they can find some stocks going up.

How can you compare today's NASDAQ 100 index with yesterday's if the stock on it change? They weight the numbers to ensure that yesterday's number is the same as today's, but it means that tomorrow's number is on a completely different scale. The NASDAQ will almost certainly go up because you've replaced losers with winners, but that makes it hard to use yesterday's numbers with tomorrow's numbers to help visualize the overall trend.

The NASDAQ 100 index is far flakier than the relatively stable Dow Jones Industrial Average, which is why the NASDAQ 100 is less often reported than the Dow. It's supposed to measure the health of the hot tech stocks in the US, which means it's going to be flaky, but it also makes the number somewhat less useful.