“Apple Inc.’s big news of 2015 might not be a disruptive wearable or a fast-growing payment system, but an overdue invitation to one of the most prestigious indexes in the world,” Jennifer Booton reports for MarketWatch. “But for investors, the excitement may be fast fleeting. Historical data show share prices only briefly rally on the announcement a company is being added to the notoriously exclusive Dow Jones Industrial Average.”
“There is a ‘clear pattern’ of good performance leading up to the addition, then ‘bad performance following,’ said Jason Goepfert, president of Sundial Capital Research, who analyzed stock price trends of the last 20 DJIA additions during the 20 days before their addition and 20 days after,” Booton reports. “Of course, some of the declines may be due to mean reversion.”
“Apple would give the Dow its first taste of next-generation tech, which has been glaringly absent from the index despite companies like Facebook Inc., Google Inc., Amazon Inc., and Apple pioneering massive innovation in mobile, e-commerce and social media,” Booton reports. “Those four companies have a collective market cap of roughly $1.4 trillion, which equates to roughly 30% of the entire Dow Jones Industrial Average — though only Apple and Facebook have share prices in-line with DJIA historical weighting standards.”
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