SHORT INTERESTS: TIPS, TRENDS, OBSERVATIONS

Small is gaining

You’d never know it by looking at the underwhelming returns, but the market cap of small stocks has been rising steadily, according to Claudia Mott, the small-cap czar at Prudential Securities.

As a result of this year’s rebalancing of the Russell 2000 small cap index, in which the largest companies are kicked upstairs to the Russell 1000 to make room for new leaders, the weighted average market cap has risen to $776 million as of June 30 compared with $657 million during last year’s rebalancing. Both the mean and median market values have risen as well, as the number of companies with market values over $1 billion has shot up to 13.8% vs. 7.1% in June 1997. The biggest company in the Russell 2000, Premier Parks, has a $2.5 billion market cap, while the smallest, Optical Cable, weighs in at just over $100 million.

What hasn’t changed much is the top sectors: technology, financial services, consumer services and basic industry, which stand at a whopping 55.9%.

Another surprise: The Russell 2000 contains 134 companies that are also in the Standard & Poor’s Mid Cap 400, in which roughly 18% of names fall between $500 million and $1 billion in market cap.

Alliance’s art smarts

Alliance Capital Management LP is talking up a “low-risk, high-yield strategy,” but it isn’t a new investment product. The New York manager of more than $248 billion is seeking to couch the debate over public arts funding in the terms it knows best, dollars and cents. Earlier this year, it underwrote a report on the economic benefits of public arts spending, dubbing it “an excellent (low-risk, high-return) investment opportunity.” Among the findings of the study: In 1995, New York state spent $65 million on the arts, which ultimately resulted in $480 million in tax revenues, a return on investment of 700%. Protecting public funding for the arts is a pet cause of Alliance chairman Dave Williams and his wife, Reba White Williams. They own one of the world’s largest private collections of prints, an estimated 5,000. Talk about diversification.

Dept. lets down defenses

The Department of Defense has redesigned its web site (www.acq.osd.mil/sadbu/sbir) to make it easier for small technology companies — and investors — to find information on its grant programs, especially one called “Small Business Innovation Research.” The program is promoting its November expo, in which the department and several co-sponsors will host thousands of firms from Route 128 — Boston’s version of Silicon Valley. Hardly known for its openness, the Defense Department has nonetheless linked to the site a new