Russell Indexes: Growth Stocks Outperform In November

Growth stocks outperformed their value counterparts at every capitalization tier in November for the second consecutive month. The broad market Russell 3000 Growth Index, for example, reflected a gain of 4.4% for the month, while the broad market Russell 3000

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Growth stocks outperformed their value counterparts at every capitalization tier in November for the second consecutive month.

The broad-market Russell 3000 Growth Index, for example, reflected a gain of 4.4% for the month, while the broad-market Russell 3000 Value Index increased only 3.4%. Though the value index maintains its year-to-date lead for 2005, the gap between value and growth has narrowed to less than one percentage point.

“Technology stocks, particularly semiconductors, as well as Internet stocks gave a boost to the growth indexes in November,” said Dave Hintz, senior manager research analyst. “By contrast, relatively lackluster returns for some utilities and energy-related stocks dampened returns for the value indexes.”

The Russell 3000 Growth, which underperformed the Russell 3000 Value for five of the first six months in 2005, has now outperformed in three of the past five months.

“The indexes indicate that market participants shifted their preferences toward growth stocks,” said Hintz. “It will be interesting to watch whether growth stocks continue to be favoured in December.”

Each of Russell’s family of U.S. equity indexes reflected a gain in November, ranging from the Russell 2500* Growth Index (5.6%) to the Russell Top 200 Value Index (3.2%).

“After an across-the-board downturn in October, every segment of the U.S. equity market bounced back with a solid return,” said Hintz. “Encouraging economic signals seem to be giving investors enough confidence now to increase their exposure to more cyclical stocks.”

Hintz noted that the market’s upward trend in November was led in general by economically-sensitive sectors such as technology and producer durables. In the Russell 3000, for example, producer durables led all others with a 7% gain, while the technology sector came in third with a 6.2% gain.

November performance figures also show the small-cap Russell 2000 Index (4.85%) outperformed the large-cap Russell 1000 Index (3.81%), ending three consecutive months of underperforming the large-cap index. The large-cap index (6.12%) continues to lead the small-cap index (5.03%) year-to-date in 2005 but now by barely more than one percentage point.

In the Russell 1000, 174 stocks increased in value by more than 10%, including Georgia Pacific (45.9%), Symbol Technologies (37.7%) and Expedia (31.9%).

Overall, the market yielded far more companies with positive returns in November. The Russell 3000, which reflected a 3.9% gain for the month, saw 72% of its members gain value. Four of the top 10 performing stocks in this index are in the health care sector-Cepheid (73.3%), Candela (54%), Bentley Pharmaceuticals (49.3%) and Bioscrip (48.7%).

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