Titans of the Dow
The Dow Jones Industrial Index (DJIA) is due for a reshuffle. This is what happens after the world has gone through changes. The exchange needs to recalibrate its stock standings to include only the top 30 companies that can make the cut. It’s as tough as Navy Seal selection!
The Dow is the Champions League of stock markets, showcasing the heaviest hitters of American industrial power. It’s a famous, esteemed index, and its constituents are selected by a special committee. “We favor companies with excellent reputations, demonstrated sustainable growth, and that are of interest to a big crowd. We want sector representation.”
Apple’s 4-1 stock split was actually decided on the directive of the special committee, but enough chit-chat, here are the major moves:
The incomers are Honeywell, Salesforce.com, and Amgen. The leavers are Exxon, Pfizer, and Raytheon Technologies.
There are gargantuan passive investment funds that aim to track the Dow 30, and these have bought the incomers and sold the leavers, as a result. Fund flow like this is common and it moves stock prices quite significantly, FYI.
There are subplots here, though, too. Exxon was the world’s largest company in 2011. It’s fall from grace mirrors the rise of tech; it’s being replaced with Salesforce (software). Pfizer needs a vaccine breakthrough to get back in it seems, replaced by a smaller biotech firm in Amgen, and manufacturer Honeywell makes a comeback after 12 years away. Finally, bye-bye Raytheon Tech as investors prep for Joe Biden’s muted defense spending! Will you be trading the new Dow today?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.