When the Amex Index goes up seven points and the INC. Index down four in a single month it is time to acknowledge that something is wrong with the INC. batch. How can 89 of America's fastest growing companies (the number of INC. 100 companies of the Index) be foundering so miserably, particularly when another speculative group is flying high? The enigma deepens when, after lying fallow for half a year, new issues are coming to life with percentage gains that outstrip the averages. If untested new public offerings are again where the fast market profits are, then shouldn't thinly capitalized, hungrily run companies with compound sales growth rates that range from 72% to 357% per year be leading the pack? The INC. Index may be doubling revenue every 12 months, yet many stocks have been cut in half in that period.

The arithmetic is the answer. The INC. Index, as described each June when it is compiled, is an unweighted average. Each stock has as much influence on the whole as another, in terms of percentage rise or fall. Because there are only 89, a few casualties can make the whole bushel look bad. And, indeed, the INC. list has suffered some smashing losses. A sampling includes Pizza Time Theatre, which has been banished from NASDAQ to the Siberia of the Pink Sheets, where it is selling for less than the price of extra cheese. Data Switch, 35 a year back, is currently around 7. Tandon has dropped from around 30 to about 8. TeleVideo Systems from 21 to 4. Except for Pizza Time, which couldn't pay its bills, OTC all, they were the victims of flat or losing quarters. And when investors bail out of thinly capitalized stocks, prices hit the ground fast.