The SPDR Dow Jones Industrial Average ETF (NYSE:
), the tracking ETF for the 30 blue-chips that comprise the
venerable Dow, will be getting a big makeover on Sept. 23.
That is the first day the Dow and subsequently DIA will open
for trading with Goldman Sachs (NYSE:
), Nike (NYSE:
) and Visa (NYSE:
) as members.
), Bank of America (NYSE:
) and Hewlett-Packard (NYSE:
), the Dow's lowest priced stocks, are being booted from the
price-weighted index. The changes come almost exactly
it was announced that
) would replace Kraft (NASDAQ:
) as a member of the Dow.
Since the Dow is a price-weighted index, DIA's largest holding
is International Business Machines (NYSE:
) at 9.43 percent followed by Chevron (NYSE:
) at 6.23 percent,
according to State Street data
. The combined share price of Alcoa, Bank of America and HP
currently hovers around $45, meaning that trio accounts for just
about 2.3 percent of DIA's weight.
Said another way, combined Alcoa, Bank of America and
Hewlett-Packard are less than half as important to DIA's returns
than United Technologies (NYSE:
), the ETF's fifth-largest holding.
Assuming prices stay relatively static over the next two
weeks, Visa would enter the Dow as the index's second-largest
holding, surpassing Chevron. Via traded around $184 at this
writing, about $62 above Chevron. At around $66, Nike would usurp
Walt Disney (NYSE:
) for the number 16 spot in DIA if the changes were made
Goldman will likely go into the Dow as the third-largest
constituent and with the addition of Visa and Goldman,
) and Travelers will move out of DIA's top-10 holdings.
With these DIA changes afoot, the next batch of potential Dow
departures includes three more tech three more tech names and
General Electric (NYSE:
), the longest running member of the index. Intel (NASDAQ:
), Cisco (NASDAQ:
) and Microsoft (NASDAQ:
) are the Dow tech names that could be vulnerable to receiving an
invitation to leave the index. Pfizer (NYSE:
) cannot be excluded from that conversation either.
Based on current share prices, adding those five stocks up
would equal a stock that is barely more important to DIA than
Chevron currently is.
complaining about why
) and Google (NASDAQ:
) were not asked to join the Dow, first think of how absurd a
price-weighted index would look with a $500 stock and an almost
$900 stock. Then, write a letter to those companies begging for a
Actually, do not bother. If companies like Apple and Google
really wanted to be in the Dow and really cared about retail
investors, they would have long ago split their stocks.
For more on ETFs, click
Disclosure: Author does not own any of the securities
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Free Trading Education -
Check out the free events taking place on Marketfy
this week. Spaces are limited. Sign up today.