Apple is too big for the Dow Jones Industrial Average

Wed, Sep 21, 2011

Finance, News

Apple shares have been on an absolute tear this week. On Monday, Apple shares climbed nearly 3% to close at $411.63, an all-time high for the company at the time. On Tuesday, investors kept the rally going as Apple shares surged ahead $1.82 to close at $413.45, besting the previous day’s all-time high. Also impressive is that Apple shares at one point on Tuesday were trading at $422.86

Putting Apple’s tremendous valuation into context, shares of Apple skyrocketed nearly 57 points in just one months time. Not too shabby considering the worry that permeated through the air following Steve Jobs’ resignation.

Apple is clearly the hottest tech stock on the market right now and the company is clearly at the vanguard of technological innovation. Consequently, many have wondered why Apple isn’t part of the Dow Jones Industrial Average (DOJA).

The DOJA is a stock index comprised of 30 large publicly traded companies and is used as a benchmark to monitor the ebb and flow of the stock market and measure performance across various industrial sectors. The companies that make up the DOJA include GE, Hewlett-Packard, Intel, IBM, and Verizon.

Again, seeing the success of Apple and how the influence of its products extend throughout the tech sector, it stands to reason that Apple deserves to be part of the DOJA more than, say, HP does given their recent turmoil.

Changes to the DOJA don’t happen all that regularly, but even assuming a change is on the horizon, don’t expect Apple to be a new addition anytime soon.

Citing a report from Bespoke Investment Group, Bloomberg explains that Apple is actually too big for its own good to the extent it would disproportionately influence the DOJA because 22% of the index would be derived from Apple.

Don’t hold your breath,” Bespoke, based in Harrison, New York, wrote in a note to clients, citing speculation today that Apple may enter the Dow. “If the stock were added to the index without a split in the shares, it would have a disproportionate weight in the index, making it more like the Dow Jones Industrial Apple.

Apple went through a similar ordeal in April of this year when Nasdaq re-weighted the Nasdaq 100 index to lessen the impact of Apple which, at the time, comprised 20% of the index.

All in all, if Apple shares are so high as to make including the company in the DOJA impractical, well, that’s a good problem to have. If Apple shares continue their upward trajectory, Apple may soon be worth more than the combined market value of Google and Microsoft.

Related: Why Apple shouldn’t issue a dividend



2 Comments For This Post

  1. CharonPDX Says:

    “DOJA”??? Who calls it “DOJA”? Nobody!

    Dow Jones Industrial Average.


    D– J—- I——— A——


    Try it again. DJIA. Repeat: DJIA Dee Jay I A.

    When I do a google search for “DOJA”, not a single result on the first five pages (as far as I went) has *ANYTHING* to do with Dow Jones.

    When I search for “DOJA Dow”, the only results that mention Dow Jones are this article, and direct quotes of this article! (Man, Google is fast.)

    When I search for “DJIA”, what do I get? FIrst, the Google Finance quote for the DJIA (the official ‘ticket symbol’ for the Average is just “DJI”, but it does return it when you search for DJIA.,) followed by pages and pages of information about the Dow Jones Industrial Average.

    Don’t make up acronyms. Use ones that already exist.

  2. joebob2000 Says:

    Apple is certainly a consumer darling, but to claim that they are “clearly at the vanguard of technological innovation” is a tad aggrandized. And the fact that they have insisted on not doing a stock split or issuing a dividend and instead just let their share price grow and grow (despite a poor P/E ratio) is a sign that Jobs’ ego has not yet left the building. The only plausible explanation as to why they don’t do these things is that it would make them “just like every other boring company” and of course, their perceived value would drop if it turned out that they were indeed as plebeian as all of those pathetic 100+ year old companies who split when appropriate, issue dividends to enrich the value of the investment, and keep the world spinning. Nope, that’s not Apple!

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