The Dow Jones Industrial Average, the most followed and best- known among the major stock indices, is shuffling around some of the companies used in its index, according to a Yahoo News report published on September 10, 2013.
Alcoa, Bank of America, and Hewlett- Packard are all getting dropped from the Dow Jones. The three companies enjoyed a long run on the Dow, but are being axed in favor of new businesses. The removal of the three is also prompted by the desire to diversify the index with new companies so that the index reflects a better cross- section of the US economy.
With three companies leaving the Down Jones Industrial Average, three new ones have to come on board to get the total back to 30. The three new companies will be Goldman Sachs, Visa, and Nike.
The Dow Jones Industrial Average periodically revises its member companies and changes them to correspond with the direction of US industry. It also eliminates companies if their stock is not performing well. Unhealthy stock performance is, in fact, the main reason Alcoa, Bank of America, and Hewlett- Packard were dropped.
"Changing the stocks in an index is not an investment recommendation," said David Blitzer, managing director at S&P Dow Jones Indices. "It is done to improve the index, to make it a better representation of the market overall….There is no intention to pick winners", Blitzer said.
The Dow Jones Industrial Average has been around since 1896 and, while its influence has waned somewhat in the past several decades, it is still the most often quoted of the major stock indices and Dow Jones membership is still highly coveted among US businesses. The three displaced companies could return to the Dow Jones in the future, but this is unlikely as history has shown that former Dow Jones members usually do not make index comebacks.
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