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The Russell 3000 Reconstitution Trade: RDNT, HEV, HOGS, WATG

It’s now apparent why RadNet Inc. (RDNT) has been creeping up the past few days. The diagnostic imaging services company is set to join the broad-market Russell 3000 Index when Russell Investments reconstitutes its comprehensive set of U.S. and global equity indexes on June 27, according to a preliminary list of additions posted on the Russell website. Among some interesting and obscure small cap names also on the list are; Ener 1 Inc. (HEV) Zhongpin (HOGS) and Wonder Auto Tech (WATG). The reconstitution represents a positive catalyst for each of the stocks. As one of the company’s cleverly summed up in a public release this morning, implicitly saying such and at the same time highlighting the rationale behind the Russell reconstitution trade, the notion to get long before it happens; “the reconstitution is usually one of the most highly-anticipated and heaviest trading days in the US equity markets, since buying and selling activities of asset managers are influenced by index component changes. As a result, being added to or deleted from the Russell Indexes, as well as variations in the weightings in the indexes, affect the market demand for the stocks of component companies.”

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