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Apple Replaces AT&T in DJIA

March 19, 2015

Apple replaced AT&T today in the Dow Jones Industrial Average (DJIA) signifying a change in the economy.

Here is an updated list of the 30 DJIA components by sector and in order by dominance in the index.

Technology: IBM, Apple, Visa, Microsoft, Intel, Cisco

Telecom: Verizon

Industrials: 3M, Boeing, United Technologies, Caterpillar, GE

Basic Materials: DuPont

Financials: Goldman Sacks, Travelers, American Express, JP Morgan Chase

Consumer goods: McDonald’s, Nike, Procter & Gamble, Coca-Cola

Consumer services: Home Depot, Walt Disney, Wal-Mart

Health Care: UnitedHealth, Johnson & Johnson, Merck, Pfizer

Oil & Gas: Exxon Mobil, Chevron

The DJIA uses stock price as its base rather than market cap.  Their stock price method gives each point change the same weight.  For instance, a one point change in Goldman Sacks, the highest priced stock in the DJIA, counts the same in the index as a one point change in GE, the lowest priced stock.  However a one point change in Goldman Sacks is about 0.52% of its value while a one point change in GE is about 4% of that company’s value.  Stated another way, if Goldman and GE’s stocks each went up 1% on the same day, Goldman’s change would account in the DJIA for about 7 times GE’s change.  Goldman would go up 1.9 points while GE .25 points.  Note that 1 point of a stock’s change is about 7 DJIA points.  So, Goldman would affect the DJIA by 13 points and GE by 1.75 points.  The “7 DJIA” points are determined by a divisor which is published daily in The Wall Street Journal. The divisor changes every time there is a change in the components, a stock dividend, split or spinoff.

In contrast the S&P 500 index is based on market cap.  Apple, which has a $740 billion market cap, will have a 1% change and will affect the S&P index 9 times greater than a 1% change in American Express, which has an $82 billion market cap.

At the end of the day, the indexes measure change and both seem to work in tandem over reasonable periods of time.

2 Comments leave one →
  1. 6hawthorne permalink
    March 19, 2015 12:00 pm


  2. Ed Mendlowitz permalink
    March 20, 2015 2:49 pm

    Additional info. The divisor just before Thursday’s changes was .1557 indicating a one point stock change is 6.4 DJIA points. The divisor after the changes was .1499 indicating one point is 6.7 DJIA points. Also because of the changes there were drops in the Index’ trailing P/E and dividend yield from 16.76 and 2.49% to 16.41 and 2.26%. Another comment is that high priced stocks cannot be included in the Dow index leaving out of consideration many of the higher priced stocks.

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