Apple Inc. (AAPL) Joining Dow Somehow Doesn’t Make Sense?


Apple Inc. (NASDAQ:AAPL) has been included in the 30-stock Dow Jones Industrial Average replacing AT&T Inc. (NYSE:T). While the technology bellwether is a maker of smartphones that has been added into the 30-stocks of the benchmark index, the replacement was for a telecom service provider. Thus, there were differences between the two companies to occupy a position in the benchmark index.

Now the question is will it make sense by Apple Inc. (NASDAQ:AAPL) joining the 30-share index or not. As a result of the addition, the Dow Jones became a little trendier. There does not appear to be any relevance.

No Relevance

The replacement of the stocks might have provided an opportunity to modernize its components besides indicating the reasons for its anachronistic and outmoded measures of the share market.

While some might argue that the news proved a point beyond doubt that as an important company like Apple Inc. (NASDAQ:AAPL) status, there were others, who thought that it should have been in the Dow Jones list long back. There are still others who think that the stock could be as vulnerable as the telecom service provider and that the best days of growth are already past it.

Not Much Movement

Joining the Dow would not benefit the share price to gain significantly. Historical data only pointed out that such stocks rally only for a brief period following the announcement of the inclusion in the index.

If good performance could lead to a clean pattern of an addition, Sundial Capital Research President, Jason Geopfert, said that a bad performance is following. He has analyzed the share price trends of the 20 additions to the DJIA in the last twenty days before and after the addition. He said that some of the fall might have been due to mean reversion.

However, more than the addition of Apple Inc. (NASDAQ:AAPL) to the Dow Jones, the number of iPhone sales in the March quarter and the potential of Apple Watch could dictate the direction of the stock.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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