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By David Gaffen
April 23 Who says Apple does not want to be in
the Dow Jones industrial average?
The iPhone maker's market value has stood high above most
U.S. corporations' for a few years, yet Apple still isn't a
component of that blue-chip stock benchmark. That is because the
Dow weighs its 30 components by price, so a $500 stock would
overwhelm the index.
A seven-for-one stock split that will chop the price to
about $75 changes the picture. Apple stunned the market with
that announcement when reporting earnings on Thursday, and the
change seems to increase the chance that the stock will be added
to the index.
"I would think it would likely make it a Dow contender,"
said Eric Kuby, chief investment officer at North Star
Investment Management Corp in Chicago, who owns the stock.
"Certainly previously it was not a candidate."
The exclusion of the largest U.S. company is odd, since the
118-year-old stock average's stated purpose is to provide "a
clear, straightforward view of the stock market and, by
extension, the U.S. economy," according to the S&P Dow Jones
Howard Silverblatt, index analyst at S&P Dow Jones Indices,
said the firm does not comment on index membership changes. With
the stock's close at $524.75 on Wednesday, the split would put
it at $74.96, slightly less than the Standard & Poor's 500 stock
index's average component price of $77.91.
That said, some investors do not think the company is doing
this to entice the S&P Dow Jones Indices.
"I don't think they targeted the Dow. I'd be surprised,
although it's fairly possible. But I don't think many companies
think about that. Certainly not a tech company," said Rick
Meckler, president of hedge fund LibertyView Capital Management
LLC in Jersey City, New Jersey.
"It is shareholder friendly for the most part, and it's the
kind of thing they have gotten some criticism lately for over
dividend policy and returning capital."
The ultimate effect on Apple itself would likely be limited:
The number of funds that track the Dow industrials is rather
small because the average only has 30 components. (The S&P Dow
Jones fact sheet on the Dow does not mention how many funds
track the 30-stock average, whereas one click on the S&P 500
summary shows that funds with assets totaling $5.1
trillion track the S&P.)
The most notable exchange-traded fund tracking the Dow is
the SPDR Dow Jones industrial average ETF Trust, which
has about $11.55 billion in assets and trades about 6.5 million
The SPDRs S&P 500 ETF Trust, meanwhile, trades about
116 million shares daily, and is often the most actively traded
issue in the market on a daily basis. It has $157.2 billion in
Oddly, putting Apple in the Dow at $75 a share would give it
only a weight of about 3 percent in the index. Visa Inc,
the average's highest-priced stock at $208.82, has an 8.2
percent weighting, despite having less than one-third of Apple's
Of course, letting Apple in means another stock in the
sector is likely to be replaced. That could mean one of the
other tech behemoths - Microsoft Corp, Intel Corp
or Cisco Systems Inc.
In the Dow's last shuffle, three lower-priced stocks were
given the boot: Bank of America Corp, Hewlett Packard
Co, and Alcoa Inc, and were replaced by Goldman Sachs &
Co, Visa Inc and Nike Inc.
(Reporting by David Gaffen, Caroline Valetkevitch and Herb
Lash; Editing by Richard Chang)