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Renewed calls for adding powerhouse Apple to the Dow

Friday, April 23, 2010 · 4:03 pm · 27 Comments

“The turnaround at Apple over the past decade is nothing short of remarkable,” Paul R. La Monica writes for CNNMoney. “The company has gone from being a niche maker of computers favored mostly by graphics designers and college kids to a consumer electronics giant that has irrevocably changed both the telecom and media industries.”

MacDailyNews Take: Apple irrevocably changed the personal computer industry, too. Three times, so far (Apple II, Macintosh, and iPad).

La Monica continues, “As a result, Apple’s market value is now about $245 billion. That’s larger than 28 of the 30 Dow components. Only Exxon Mobil and Microsoft are worth more. And the gap between Apple and Microsoft is shrinking fast — Microsoft’s market value is approximately $270 billion.”

La Monica writes, “I’ve suggested that Apple could be a candidate to join the Dow in numerous columns over the past few years in which I called for GM, AIG and Citigroup to be kicked out. (They all are now former Dow members by the way.) But now more than ever, Apple merits serious consideration.”

Full article – recommended – here.

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Comment Feed

27 Comments

1 2 Next »

NYC Doc

Friday, April 23, 2010 - 4:13 pm · Reply

Joining the Dow would help anyone that has AAPL stock since it would force all the index funds that follow the Dow to immediately buy large amounts of AAPL. Great for the stock price.
ken1w

Friday, April 23, 2010 - 4:16 pm · Reply

Obviously. What more does Apple need to do?

Being added should increase AAPL stock price even more, because many index-based funds will then be required to have it in their portfolios. Sell whatever stock got kicked out to make room for AAPL and buy some AAPL.
JoeMac

Friday, April 23, 2010 - 4:19 pm · Reply

@NYC Doc,

Is that the only advantage of joining DOW? I’ve always wondered what’s the difference in being listed by NASDAQ or DOW. Chime in, anyone. Thanks.
TARDo

Friday, April 23, 2010 - 4:20 pm · Reply

Someone please explain what it means to ‘join the DOW’ as opposed to being listed in the stock exchange.

And—if you’re feeling especially helpful—what’s the difference between market cap and market value?

I’ve never owned stock and dats why I’m ignernt and plus doing the google is hard.
Raymond in DC

Friday, April 23, 2010 - 4:20 pm · Reply

It’s my understanding all the companies making up the Dow are on the New York Stock Exchange. Apple is on NASDAQ. I don’t know if NYSE affiliation is a rule, but adding AAPL to the Dow will only distort the index as it’s hardly representative of the typical large corporation. Those who see the index as reflecting corporate or economic health will thus get a false picture.
Marian

Friday, April 23, 2010 - 4:22 pm · Reply

@JoeMac: DOW is not a stock market. NASDAQ (like NYSE) is.

DOW is an index.
NASDAQ is both a (fully electronic) stock market and an index.
fandango

Friday, April 23, 2010 - 4:22 pm · Reply

Apple needs to finally be inducted into the ‘Big Boys Club’.

It’s time to do so….
Deus Ex Technica

Friday, April 23, 2010 - 4:29 pm · Reply

As I understand it, you can’t really “join” the DOW any more than you can “join” the Hall of Fame for a given sport. You have to be deemed worthy by the folks who manage the fund, and then they simply include your stock in the fund. I’m not even sure the company in question really has a say.

I could be wrong – anyone actually know this actually works?
jtc

Friday, April 23, 2010 - 4:39 pm · Reply

as Apple gets closer to passing Microsoft, I believe more people will continue to buy just to get past them and leave them behind as #3 Then next stop is #1 passing Exxon.. it will happen.. just takes time
Cubert

Friday, April 23, 2010 - 4:39 pm · Reply

I would say that Apple has changed the computer industry 4 times. Slip iPhone in there between Mac and iPad.
Grumble

Friday, April 23, 2010 - 4:40 pm · Reply

The bit about graphic designers is a nice digg at Adobe, something they seem to have missed.
Predrag

Friday, April 23, 2010 - 4:44 pm · Reply

There are very many different indices out there, representing all kind of industries. DJIA (Dow Jones Industrial Average), S&P500;(Standard & Poor 500) and NASDAQ Composite are by far the most commonly quoted. An index, such as these three, is essentially a compendium of stocks that represent certain type of companies. DJIA (the DOW) is the index that represents 30 most powerful companies in the US, from various industries. S&P;500 represents an average value of some 500 companies, while NASDAQ Composite represents ALL stocks and derivatives traded on the NASDAQ stock market (some 3,000 various financial instruments). Companies that are included in DJIA do NOT have to be traded on the NYSE (some are traded on NASDAQ).

When AAPL was included in a smaller S&P;index several years ago, its value jumped by almost 10%. This is because many investment portfolios and mutual funds have definitions in their regulations that require a specific percentage of the portfolio to contain stocks from a specific index. Large numbers of these investment products have Dow Jones Industrial Average as one of their components. As these indices add or remove companies, all of these investment companies adjust their portfolios to reflect changes in the indices. If DJIA added AAPL, there would be a massive buy-in into AAPL, not because some investment analysts are speculating that this would be a smart move, but because financial companies would simply be required to buy AAPL, due to their portfolio rules.

Was this a reasonable explanation?
Predrag

Friday, April 23, 2010 - 4:48 pm · Reply

Conversely, if a stock is dumped from DOW (like Citi, AIG, GE), the stock immediately drops by at least 15%, for the same reason (large funds dumping it to make sure the portfolios that are tied to an index are correctly represented).

I don’t think there is a single negative consequence of AAPL being added to DOW.
LordRobin

Friday, April 23, 2010 - 4:55 pm · Reply

“The Dow” is short for “The Dow Jones Index of 30 Industrials”, one of the earliest and still the most popular measure of the performance of the stock market. That’s the number you hear every day on the news. The index is named for its originator, publisher Dow Jones, then of the Wall Street Journal.

My understanding is that “the stock market” doesn’t necessarily mean the NYSE. I believe that at least one NASDAQ stock was added to the index at some point, but my memory’s failing me. It was a big deal when it happened. I think it was during the dot.com boom.

The silly thing about the index is that it’s utterly unnecessary these days, yet remains in place through sheer unstoppable inertia. The Dow index was first created in a time long before computers, when indexing the entire market would have been impractical. Instead, they selected 30 stocks to serve as a measure of the entire market. These days, of course, indexing the entire market is trivial, and there is an index of the entire market. But the old-fashioned Dow index remains the most influential number.

——RM
Predrag

Friday, April 23, 2010 - 5:34 pm · Reply

There are (at least) three NASDAQ companies in the Dow Jones index:

Inetl (INTC)
Microsoft (MSFT), and the most recent entry,
Cisco (CSCO)

And yes; looking at the companies currently on the index, Apple surely must be included. The only question is, who will be kicked out?
Macromancer

Friday, April 23, 2010 - 5:55 pm · Reply

This would be a good place to start for those of you wanting to learn more about what this sort of thing means:

http://www.investopedia.com/
El Guapo

Friday, April 23, 2010 - 6:25 pm · Reply

“from being a niche maker of computers favored mostly by graphics designers and college kids”

Who did they think those college kids would grow up to be?
Rike

Friday, April 23, 2010 - 6:37 pm · Reply

Predrag and LordRobin
Thank you!
KenC

Friday, April 23, 2010 - 8:30 pm · Reply

Of course, as a shareholder I’d like to see Apple added to the Dow; however, the Index is supposed to be representative of industry, not just the biggest companies. Technology is already represented by Cisco, HP, Intel, IBM, and Microsoft. And, Cisco was only just added last year, as GM and Citibank were knocked out.

In general, someone has to be knocked out, before someone is added. I’m not sure, any of the current companies in the Index are at risk of getting knocked out.
Big Als MBP

Friday, April 23, 2010 - 8:40 pm · Reply

As soon as Exxon starts paying for carbon credits Apple will be in first place in no time.