Thursday, April 13, 2006

Forbes Beltway Index: Methodology

WASHINGTON, D.C. - The Forbes Beltway Index tracks the market progress of companies with close business ties to the U.S. federal government: the biggest contractors, government-sponsored enterprises and companies enjoying unique competitive advantages thanks to federal law.

Each Monday, we update price data for the index, in which we give equal weight to each of the component companies. With an equal-weighted index, all components have the same contribution to the index value. This contrasts with big indexes such as the Standard & Poor's 500, which are weighted toward companies with the largest market capitalizations.

No matter how you feel about what goes on in Washington, our Forbes Beltway Index companies should be of investing interest. Why? For one, winning a government contract is no picnic. Assuming everyone plays by the rules, a company must show procurement officials that it has good products and services, deep technical expertise and, perhaps most important, the financial stability and discipline to carry out the contract. In many cases, companies must provide several years of audited financials before winning a bid.

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