The Dow Jones Industrial Average, arguably the most famous and
oft-quoted benchmark of American stock performance, will be
swapping one of its components in one week's time. The index will
Kraft Foods (
and putting in
UnitedHealth Group (
, the largest firm by far in the 'accident & health' segment of
the insurance industry.
The move comes as Kraft looks to split up into two firms with
one focused on the grocery business, and the other zeroing in on
the snacks business under the absurd name of 'Mondelez'. The
removal of Kraft also marks one of the shortest time periods ever
on the Dow, as the food company was added in just 2008 in order to
the plummeting AIG
However, some are disappointed by the move to include UNH over
other companies, with a few looking for the DJIA to include GOOG or
AAPL instead. Unfortunately, these have their own issues, as their
lofty share price would distort the price-weighted benchmark,
forcing the index managers to look elsewhere.
Still, many are asking why another health care-focused firm?
While it is true that the company operates in a different segment
than other index components like
, it is still, arguably, in the broader health care sector.
Clearly the health care segment is growing in importance to the
broader American economy, but there are other choices that could
have also been deserving of inclusion in the index.
After all, the benchmark is designed to be a broad barometer of
the American stock market. How many health care and financial firms
do we need to accomplish that?
It isn't like there aren't a number of other possible choices
out there as
that half a dozen firms were considered before UNH was eventually
chosen. Personally, I think some of the following firms /segments
could have made for interesting selections at this time:
- Where are all the transportation stocks in the index? How about
Union Pacific (
Federal Express (
- Yes it is a little 'old school' in terms of tech, but it is at
a decent price point and its PayPal service is increasingly
important to the American economy. Plus, the company is pretty
big with a roughly $65 billion market cap.
- True, we already have
in the index, but Monsanto arguably offers a different large cap
play on the chemicals segment. This is especially true given the
growing crop crisis and the importance of feeding an ever growing
- With commodity prices surging once again, wouldn't it be
appropriate to think about including a firm like
Newmont Mining (
Bring back the cars!
General Motors (
are bigger than the three smallest DJIA components, could we have
brought back GM or looked at including Ford in the Dow?
What do you think; did the DJIA make the right choice in
including UnitedHealth over the stocks listed above? Besides Google
and Apple, which company should have been put in there instead?
Let us know in the comments below!
APPLE INC (AAPL): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
KRAFT FOODS INC (KFT): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
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