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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. "
It's not all good news, FTA:
The news was not so good for Level 3 Communications Inc, which was removed from the Nasdaq-100 two years after it joined it. Other tech-related stock to be removed included Intersil Corp, Molex Inc, QLogic Corp, Sanmina-SCI Corp, and Synopsys Inc.
Stocks rise and fall but I don't think this means we're in another bubble.
Bradley Holt
I think they have. Both of these companies have proven business models, and took quite some time to get their stock this high (Google did it overnight, but after years of being private and still awesome.) These are not "I'm going to open an online pet store, but first I need an IPO" type companies.
Excuse my speling.
Making The Bar Project
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.
That's my motto buy high, sell low.
Seriously, one would be stupid to buy only for your two reasons. Adding new services does necessarily mean more revenue. Are you aware of how many companies have suffered when they tried to do too much?
Maybe you were trying to be funny
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.
Google has been an innovative and interesting company, and Red Hat probably has the best name recognition for Linux in the business. These steps make sense.
The big question with Google is if these laurels that people keep heaping on them will last when Google inevitably loses stock value, for whatever reason. Hopefully, being added to an index like this indicates that some smart people feel that they are here to stay. However, I think most financial people slept through their classes on "Long Term Investment" in business school (if indeed business schools actually offer classes like that anymore).
Google's success = Innovation and they will need to keep innovating if they want to remain relevant. There is always going to be a Microsoft or other competitor who can figure out a way to clone Google's offerings with "just enough" functionality, the right price point, and some evil marketing ploys to create instant competition.
To remain in this game with a high level of quality means new ideas and the willingness to go to places no one thinks can be reached. That will become harder as some of the money pumped into them starts acting like cholesterol: slowing them down and cutting off blood flow to people's brains. Ph.D's may be good at what they do, but they aren't immune to corrosive influences of cash and the lures of prestige. There is going to come a point where Google starts to face the potential for crippling hubris, and at that point, the company will reach it's first real test as a long-term investment. If it can get over its own reputation and keep going, then you have a company worth owning. If not, then they go the way of the 90's, sooner or later.
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.
Of course, if you believe in the Efficient Markets Hypothesis, then these future expectations of growth are already built into the price of RedHat. In other words, people already expect RedHat to outperform the market over the next six months, and therefore RedHat's price has already risen to account for that. And although the company itself might perform well, the stock has the same expected return over the next six months as the rest of the market.
On the other hand, if you don't believe markets are efficient... you might have an argument here. :)
My userid is prime!