Dow changes 2 stocks

[disneysteve]

The Dow Jones Industrial Average is changing. They've removed Altria and Honeywell and replaced them with Bank of America and Chevron.

I have no idea what that means or what affect it will have on the Dow's performance, but thought it was worth mentioning.

[humandraydel]

Personally, I hate to see ANOTHER bank/financial in the DJIA. And as much as I HATE to see Altria go, it's probably warranted given that Altria isn't the company it used to be. Honeywell should stay, however. And, given the market cap of oil stocks, I'm not surprised that another oil company would be added. All of this kind of reminds me of an article I read which points out that, ultimately, the S&P 500 is a "mutual fund" of sorts. Several companies have done terrible after being added to the S&P 500. Is the DOW an overrated "mutual fund" also?

[Taribor]

I'm not sure I want any more finanical representation on the dow at this point aside from AMEX, AIG, Citigroup, JP Morgan, at least until the mortgage mess is over, but I'm sure DJIA is thinking much longer term than we are.

The changes to the blue chip index of 30 stocks are intended to better reflect which industries have greater influence over the economy and stock market, Dow Jones said.

Bank of America, based in Charlotte, N.C., is the nation's biggest bank by deposits, and Dow Jones said the financial industry does not have enough representation in the index.
Dow Jones said it added Chevron, an energy company based in San Ramon, Calif., to the index because of the oil and gas industry's growing importance to the global economy.

Dow Jones said Altria is being shed from the index because the company, which makes Marlboro cigarettes through its Philip Morris Cos. unit, has become a "much smaller and more narrowly focused company." Altria has spun off its Kraft Foods Inc. subsidiary as a separate company, and is currently splitting its international business from its U.S. business.

Honeywell is being dropped because it is the smallest company on the index by revenue and profit, Dow Jones said. Plus, industrial companies have become less important to the stock market, Dow Jones said.

[Scanner]

I am not sure the Standard and Poors 500 Index is the exact same as the Dow Jones Industrial Average.

[BTC]

I'm surprised that they got rid of Honeywell.

[disneysteve]

I am not sure the Standard and Poors 500 Index is the exact same as the Dow Jones Industrial Average.

They aren't the same at all. The DJIA is made up of 30 stocks. The S&P 500, of course, is made up of 500 stocks.

[disneysteve]

What confuses me is how can we compare the performance of the Dow in 2008, for example, with it's performance in 2007 or 2002 or whenever, if the stocks making up the average have changed? Honeywell (a tech company) and Altria (a cigarette company) aren't necessarily going to perform the same as BoA (a financial company) and Chevron (an oil company).

[Broken Arrow]

Motley Fool's take.

[Ima saver]

Thanks for the info, Steve!

[jc3900]

Doesn't the dow also use a price weighted average. Meaning that if a 70 dollar stock goes up 1, that means the same as a 5 dolar stock going up 1 dollar.So basically Berkshire could never get added just because of the price factor.

[Dinadur]

I blame Rupert Murdock... this is why I use the S&P as my performance benchmark

[jc3900]

Yeah, as that video pointed out. The DOW is really a show pony and not the true work horse like the S&P 500.