The Future Dow 30 Could Become 'Apple Plus Some Other Stuff Index'
May 11, 2012
Despite some encouraging signs, the world’s economy hasn’t fully recovered from the recession that started five years ago. One sign of this is the Dow Jones Industrial Average, which last hit an all time high nearly five years ago. However, things could be much different today had Apple joined the Dow in 2009, according to CIO Today.
Last month, we reported that the powers at Dow Jones were thinking of adding Apple to the list of companies that make up the elite Dow 30. In doing so, the company would replace Alcoa, Bank of America, or Hewlett-Packard on the 116-year-old list. Google is also being considered for the Dow 30.
Surprisingly, this move almost happened three years ago when the Dow was last changed. Then The Travelers Company and Cisco Systems replaced General Motors and Citigroup on the list.
If Apple had joined the list then, the index would be at 15,360, or about 1,200 points above its record of 14,164 set in October 2007, according to Paul Hickey of Bespoke Investment Group who crunched the numbers.
Today, the Dow is trading at around 12,854 in late afternoon trading.
If Apple was part of the Dow now, not only would it be higher, “but everyday Americans watching the Dow set one record after another would probably feel wealthier.” In other words, people would be spending much more and the economy as a whole would be better.
As Nicholas Colas, chief market strategist at ConvergEx Group explains:
It wouldn't be the Dow Jones industrial average. It would be the Apple Plus Some Other Stuff Index.So why keep Apple off the list? As we first reported, the Dow weighs its 30 components based on the absolute price of their shares. For Apple, this could prove difficult since their stock is trading at around $600 per share. To join the list, Apple would probably have to split their stock (five-for-one or 10-to-one), which they haven’t done since 2005. First launched in 1896, the Dow 30 currently includes seven technology-based companies. In addition to Cisco, HP (added in 1997) and IBM (1979), the index includes AT&T (1999), Intel (1999), Microsoft (1999), and Verizon Communications (2004). Apple (AAPL) and Google (GOOG) trade on NASDAQ. If the economy as a whole would benefit by adding Apple to the Dow, we say, do it now! Besides, wouldn't a better economy also lead to more Apple sales too? Win-Win, in our opinion. Would you like to see Apple added to the Dow 30 even if it means a stock split would likely be necessary?
