iphone 8 apple stock

Isn't it Time for Apple Inc. (AAPL) to Join the Dow?

Isn't it Time for Apple Inc. (AAPL) to Join the Dow?

As the company with the largest market cap at $548 billion, Apple Inc. (NASDAQ:AAPL) is the most valuable company. It is the market leader in many other areas but one distinction it does not have is being included as one of 30 stocks in the Dow Jones Industrial Average.

After its recent stellar earnings report, isn’t it time to revisit the addition of Apple in the Dow?

Barron’s makes the case in this week’s issue. The Dow hasn’t been updated since 2009 and as the blue-chip index, it represents the best of the best with its 30 components combined as a picture of corporate America.

One of the last technology companies to enter the DJIA in June 2009, was Cisco Systems, Inc. (NASDAQ:CSCO). It replaced GM, who was cut by Dow Jones because of its bankruptcy. Cisco joined Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corp. (NYSE:IBM), Intel Corp. (NASDAQ: INTC) and Hewlett-Packard Co. (NYSE:HPQ) in the Dow, increasing the technology weighting to approximately 17 percent.

At the time Dow Jones made the case for Cisco’s addition as a company that is the “21st Century version of automobiles…having the same kind of effect on American culture as automobiles did in the 20th Century.”

After reading that statement, isn’t there also a case for Apple’s inclusion? Here’s a few reasons.

  • The company’s profit last quarter was $11.6 billion.
  • In March, it finally threw in the towel for a dividend; it already ranks as the third-largest payout, according to The Wall Street Journal, coming in behind the leader Exxon Mobil Corporation
    (NYSE:XOM) and AT&T Inc. (NYSE:T).
  • Apple sits on a huge stash of cash.
  • When Apple introduces a product, consumers listen and immediately purchase it.

All sound reasons to add Apple to Dow, don’t you think?

But Barron’s has an interesting point with Apple entering the Dow. It suggests by that by adding the company, it could cause a deviation on the ” Theory of Relativity” and possibly represent 26 percent of the index’s weighting. With its stock price sitting around $600, its swings could make the Dow look volatile. To avoid this, the powers to be would have to change the calculation to stop possible misrepresentations.

There may also be a second concern with adding Apple to the Dow. Because it is so successful, it only represents itself as noted by Steve Russolillo of WSJ, “As strange as it may sound, the currently constituted Dow — which last summer suffered four straight 400-point moves for the first time ever — may be a better representation of the actual economy.”

And just to stir the pot some more, why not add Google Inc (NASDAQ:GOOG) too?



Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 3/31/2020 or after the next 45 subscribers take advantage whichever comes first – please do not share this discount with others