Nearly a dozen Orange County companies have been added to the Russell 2000 index of smaller stocks since June as the barrier to entry came down.
For many, being part of the index popular with some investors and analysts can lead to greater visibility, giving them a better shot at raising money from investors.
Five of the 11 local stocks added to the index this year are in healthcare, an industry that has held up better than others during the recession.
The common thread among all is that they met the $78 million market value threshold, which was more than halved from last year’s $167 million cutoff.
The threshold is the lowest in 16 years, a sign of the damage inflicted on companies from last fall’s Wall Street meltdown and subsequent dip this spring, according to Maria Pinelli, Americas director of strategic growth markets for New York-based Ernst & Young LLP.
The Russell 2000 is made up of about 2,000 smaller stocks and is run by Tacoma, Wash.-based Russell Investment Group, part of Milwaukee-based Northwestern Mutual Life Insurance Co.
The index is readjusted every June.
As of Aug. 31, the average market value of a Russell 2000 company was $860 million. The largest in the group is $2.7 billion.
The 11 local newcomers bring the Orange County contingent of the Russell 2000 to about 30 companies. Earlier members include Costa Mesa-based Emulex Corp., Huntington Beach-based Quiksilver Inc., Anaheim-based Pacific Sunwear of California Inc. and Santa Ana-based Corinthian Colleges Inc.
The newcomers are looking to take advantage of their new status.
“Our inclusion in the Russell 2000 increases the awareness of our accomplishments among institutional investors and the investment community, as well highlights our potential for strong growth this year,” said J. Russell Phillips, chief executive of Irvine-based Diedrich Coffee Inc.
A total of 326 companies were added to the index this year, the most in five years. They replaced a similar number of companies that were shaken out or moved up into the Russell 1000 index of bigger stocks.
The largest local addition was Aliso Viejo-based Clarient Inc., a healthcare company with a recent market value of about $330 million.
“The Russell index is important global recognition of our company’s growth and value,” said Ron Andrews, Clarient’s chief executive.
The smallest was Anaheim-based DDi Corp., a circuit board maker worth about $85 million at recent check.
Healthcare companies dominated the local newcomers.
They included Aliso Viejo-based Avanir Pharmaceuticals, Irvine-based Endologix Inc., Irvine-based Ista Pharmaceuticals Inc. and Irvine-based Spectrum Pharmaceuti-cals Inc.
The second largest local company added to the index was Newport Beach-based Acacia Research Corp., which acquires patents and collects royalties on their use. It had a recent market value of $280 million.
Endologix had the third largest market value at $250 million, followed by construction and engineering company Pri-moris Services Corp. in Lake Forest, with a recent $240 million valuation.
Bank operator California First National Bancorp of Irvine was the only local financial company added to the index.
Since March, the Russell 2000 has gained about 60% in value, bettering the performance of the U.S. market’s largest 500 stocks as measured by the S&P 500’s 50% gain.
