For the first time since 2013, the Dow Jones Industrial Average will make three simultaneous changes to the 30 stocks that make up the benchmark. Yesterday it was announced the Honeywell International will replace Raytheon Technologies, Salesforce will replace Exxon Mobil, and Amgen will replace Pfizer, with the changes taking effect at the end of this month. The changes are being prompted due to Apple’s decision to instigate a 4-1 stock split, and as a result taking the technology weighting within the Dow down from 27.6% to 20.3%. By adding Salesforce alone that weighting in technology will come back to above 23%.
Before the split, Apple was the most heavily weighted stock in the index, due to the Dow being price-weighted, (the S&P 500 is based on market capitalisation) now it’s the 17th most prominent. That honour of the most heavily weighted component now goes to UnitedHealth Group, followed by Home Depot then Amgen. Of the new boys, Salesforce will be the sixth most weighted stock, with Honeywell coming in at number eleven.
As we wrote last week, Apple has soared this year, up over 70% year-to-date, on its way to hitting USD2tn market capitalisation, and contributing more than 1,400 points to this year’s Dow’s performance. The S&P Dow Jones Indices said in a statement that the changes ‘help diversify the index by removing overlap between companies of similar scope and adding new types of businesses that better reflect the American economy’.
It’s a sad end to Exxon's near 100-year reign in the Dow. The oil giant was added to the index in 1928 when the benchmark was expanded from 20 to 30 stocks. Pfizer's reign was a little less glorious, being added just 16 years ago.
For those of you wondering who were the winners and losers in the 2013 changes, Visa, Goldman Sachs and Nike replaced Bank of America, Hewlett-Packard and Alcoa.