Russell rebalancing provides trading opportunities: Bear Stearns

By Ronda Fears

Nashville, Tenn., June 19 - The Russell indexes will be rebalanced at the end of the month and as a result, some of the names in the convertible universe will be added or deleted, which should provide for some good trading opportunities.

Based on history, the bulk of this rebalancing will happen in the last 10 days of June, said Bear Stearns & Co. convertible analysts in a report Wednesday.

To this add a meaningful arbitrage presence and there likely will be heightened volatility in these names over the next two weeks.

The Bear Stearns convertible research team outlined stocks that are candidates for index action and also have convertible debt outstanding.

These names should be of interest to both outright as well as arbitrage investors who wish to play the volatility, stock direction or both, the analysts said.

"We do caution the investor that many of these names have seen their enterprise value decimated and may have uncertain and speculative future prospects," the analysts said in the report.

Stocks to be added to the Russell 2000 with convertibles are Central Garden and Pet Co., CKE Restaurants and Odyssey Re Holding Corp.

Stocks to be deleted from the Russell 2000 with convertibles are Computer Network Technology, Ibasis Inc., Internet Capital Group, ITC DeltaCom, Metromedia International Group, MRV Communications, Pegasus Communications Series C, SpectraSite Holdigns, TranSwitch Corp. and Viropharma Inc.

Another 34 names are seen migrating to the Russell 2000 from the Russell 1000, while some seven are seen migrating to the Russell 1000 from the Russell 2000.

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