A year ago this week, the S&P Dow Jones Indices group reshuffled the Dow Jones Industrial Average, swapping out three stocks rather than the customary one or two alterations. They substituted Alcoa, Bank of America, and Hewlett-Packard, with Goldman Sachs, Nike, and Visa. How have these changes worked out? Considering the deletions are up 47%, 8%, and 26% year-to-date respectively, compared to the added stocks’ performances of 4%, 1%, and -5%, the answer is a simple “Not well”.
In other news, only 5 stocks make up the gains for the Dow this year: Johnson & Johnson, Disney, UnitedHealth Group, Merck, and Intel. While the top ten companies by weight account for 52% of the Average, half earned negative returns. This year’s highs above the 17,000 threshold can be attributed to tech (IBM, Microsoft, Intel, and Cisco) and healthcare (United Health Care Group, Johnson & Johnson, & Merck) companies, as well as Frozen…meaning Disney. All in all, each component of the Dow matters. Apart from the deletions, had Apple been added right after its recent split date, we would be 39 points higher on the Dow.
Interesting.
Grab my free swing trading thoughts here.