Apple recently surpassed Exxon Mobil to become the world's largest company in terms of market value, but the tech giant still isn't one of the 30 titans of American industry — from IBM to Kraft — that make up the Dow Jones Industrial Average (DJIA). Since its creation in 1882 by financial journalists and statisticians, the list of bellwether companies making up the Dow has changed fewer than 50 times, and the last company to be added was Cisco in 2009. Is it Apple's time?
Yes. This is a win-win: "Apple should have been added years ago," says LandColt trading's Todd Schoenberger, as quoted by CNBC. Inclusion in the Dow would not only be a win for Apple shareholders — the move would likely drive the stock price even higher — but it would also give the index a much-needed boost. "The ripple effects would be tremendous... let's bring it on."
"Is Apple really ready to make a move to the Dow?"
No. This would inaccurately skew the Dow: "There's a major problem with adding Apple: Its stock price is just way too high," says Mark Gongloff in The Wall Street Journal. Shares are currently hovering around $420. That's more than double the next highest-priced stock in the index — which is IBM, at around $176. Because of the Dow's peculiar weighting formula, Apple's sky-high stock price would command outsize influence on the Dow, and would be weighted many times more heavily than the stock prices of General Electric, Alcoa, and Bank of America combined. That would render the Dow all but irrelevant as a measure of true economic performance.
"Apple: Too expensive for the Dow"
And it actually might hurt Apple: "If history is any guide, the last thing AAPL wants is to be added to the DJIA," says Bespoke Investment Group, as quoted by Barron's. While being on the Dow has long been considered a "badge of honor for most companies," inclusion has historically been bad for Nasdaq-listed stocks like Apple. Microsoft, Intel, and Cisco Systems are the Dow's only three Nasdaq stocks at presents, and they've all declined since being added to the index.
"Apple: Too big for the Dow, bullet dodged, says Bespoke"