Company |
Price |
YTD Return |
Dow Weight |
Ratio to Equal Weight |
Ticker |
Mkt Cap ($B) |
Weight MC |
Ratio to Dow Weight |
AA Alcoa Inc |
8.63 |
-0.23% |
0.51% |
0.15 |
AA |
9.21 |
0.23% |
2.20 |
AXP American Express Co |
56.42 |
19.61% |
3.35% |
1.00 |
AXP |
63.96 |
1.62% |
2.07 |
BA Boeing Co |
70.36 |
-4.08% |
4.17% |
1.25 |
BA |
52.90 |
1.34% |
3.12 |
BAC Bank of America Corp |
8.15 |
46.58% |
0.48% |
0.14 |
BAC |
87.83 |
2.22% |
0.22 |
CAT Caterpillar Inc |
87.63 |
-3.28% |
5.20% |
1.56 |
CAT |
57.25 |
1.45% |
3.59 |
CSCO Cisco Systems Inc |
19.12 |
5.78% |
1.13% |
0.34 |
CSCO |
101.97 |
2.58% |
0.44 |
CVX Chevron Corp |
111.29 |
4.60% |
6.60% |
1.98 |
CVX |
218.37 |
5.52% |
1.20 |
DD E. I. du Pont de Nemours and Co |
50.24 |
9.74% |
2.98% |
0.89 |
DD |
46.74 |
1.18% |
2.52 |
DIS Walt Disney Co |
49.17 |
31.12% |
2.92% |
0.87 |
DIS |
88.22 |
2.23% |
1.31 |
GE General Electric Co |
20.64 |
15.24% |
1.22% |
0.37 |
GE |
217.93 |
5.51% |
0.22 |
HD Home Depot Inc |
56.55 |
34.51% |
3.35% |
1.01 |
HD |
84.88 |
2.14% |
1.56 |
HPQ Hewlett-Packard Co |
17.64 |
-31.54% |
1.05% |
0.31 |
HPQ |
34.77 |
0.88% |
1.19 |
IBM International Business Machines Co… |
195.70 |
6.43% |
11.61% |
3.48 |
IBM |
223.64 |
5.65% |
2.05 |
INTC Intel Corp |
25.04 |
3.26% |
1.48% |
0.45 |
INTC |
125.28 |
3.17% |
0.47 |
JNJ Johnson & Johnson |
67.74 |
3.29% |
4.02% |
1.21 |
JNJ |
186.76 |
4.72% |
0.85 |
JPM JPMorgan Chase and Co |
37.23 |
11.97% |
2.21% |
0.66 |
JPM |
141.43 |
3.57% |
0.62 |
KFT Kraft Foods Inc |
41.28 |
10.48% |
2.45% |
0.73 |
KFT |
73.25 |
1.85% |
1.32 |
KO The Coca-Cola Co |
38.11 |
8.93% |
2.26% |
0.68 |
KO |
171.57 |
4.34% |
0.52 |
MCD McDonald’s Corp |
88.25 |
-12.04% |
5.23% |
1.57 |
MCD |
88.99 |
2.25% |
2.33 |
MMM 3M Co |
91.98 |
12.54% |
5.45% |
1.64 |
MMM |
63.59 |
1.61% |
3.39 |
MRK Merck & Co Inc |
42.80 |
13.53% |
2.54% |
0.76 |
MRK |
130.35 |
3.29% |
0.77 |
MSFT Microsoft Corp |
30.26 |
16.54% |
1.79% |
0.54 |
MSFT |
253.64 |
6.41% |
0.28 |
PFE Pfizer Inc |
23.74 |
9.70% |
1.41% |
0.42 |
PFE |
177.33 |
4.48% |
0.31 |
PG Procter & Gamble Co |
66.68 |
-0.04% |
3.95% |
1.19 |
PG |
183.65 |
4.64% |
0.85 |
T AT&T Inc |
36.56 |
20.90% |
2.17% |
0.65 |
T |
210.91 |
5.33% |
0.41 |
TRV Travelers Companies Inc |
64.80 |
9.51% |
3.84% |
1.15 |
TRV |
24.97 |
0.63% |
6.09 |
UTX United Technologies Corp |
79.20 |
8.36% |
4.70% |
1.41 |
UTX |
72.21 |
1.82% |
2.57 |
VZ Verizon Communications Inc |
42.25 |
5.31% |
2.51% |
0.75 |
VZ |
120.37 |
3.04% |
0.82 |
WMT Wal-Mart Stores Inc |
71.56 |
19.75% |
4.24% |
1.27 |
WMT |
242.16 |
6.12% |
0.69 |
XOM Exxon Mobil Corp |
87.31 |
3.01% |
5.18% |
1.55 |
XOM |
403.02 |
10.18% |
0.51 |
Total |
1,686.33 |
3,957.15 |
||||||
High |
47% |
3.48 |
10.18% |
6.09 |
||||
Low |
-32% |
0.14 |
0.23% |
0.22 |
||||
Ratio |
24.01 |
43.76 |
27.97 |
As I was considering the Dow Jones Industrial Average (INDEXDJX:.DJI), I considered how much influence International Business Machines Corp (NYSE:IBM) has relative to an equal-weighted index. It has 3.48 times more influence that the average. Then I considered the lack of influence of Bank of America Corp (NYSE:BAC), whose influence is 86% less than the average. It may be up 47% YTD, but it budges the index but little despite its large market cap.
Such is life in a price weighted index that was designed to work around 1900. Add up the prices, divide by a number, and there is the index.
Even an equal weighted index would be more realistic. But what if we created a market cap (actually float) weighted ow Jones Industrial Average (INDEXDJX:.DJI), like the S&P 500?
At this point, Exxon Mobil Corporation (NYSE:XOM) would be the heavy hitter, and small Alcoa Inc. (NYSE:AA) the baby. Prediction: Alcoa Inc. (NYSE:AA) and The The Travelers Companies, Inc. (NYSE:TRV) will leave the Dow, to be replaced by Oracle Corporation (NASDAQ:ORCL) and Berkshire Hathaway “B” shares.
Wait! QUALCOMM, Inc. (NASDAQ:QCOM)?! Why not Apple Inc. (NASDAQ:AAPL) or Google Inc (NASDAQ:GOOG)? Their share prices are too high, and the DJIA is too messed up already. If Bank of America Corp (NYSE:BAC) wanted to help the Dow, they would do a 1-10 reverse split, as should Alcoa Inc. (NYSE:AA), should they stay in the Dow.
The DJIA is a historical accident that has more then outlived its 15 minutes of fame. It does not represent the market as a whole. The best that Dow Jones News Corp could do is remake it as a megacap market cap weighted index. Then it might have real punch and validity. Call it the News Corp (NASDAQ:NWSA) (NASDAQ:NWS) Industrial Average [NCIA]. What might that index look like?
company | ticker |
mktcap |
Percentage |
Apple Inc. | AAPL |
607,542 |
11.02% |
Exxon Mobil Corporation | XOM |
408,049 |
7.40% |
Microsoft Corporation | MSFT |
259,047 |
4.70% |
Wal-Mart Stores, Inc. | WMT |
243,581 |
4.42% |
International Business Machine | IBM |
229,949 |
4.17% |
General Electric Company | GE |
221,736 |
4.02% |
Google Inc | GOOG |
221,447 |
4.02% |
Chevron Corporation | CVX |
221,055 |
4.01% |
AT&T Inc. | T |
214,434 |
3.89% |
Berkshire Hathaway Inc. | BRK.A |
212,869 |
3.86% |
Johnson & Johnson | JNJ |
186,927 |
3.39% |
Procter & Gamble Company, The | PG |
184,536 |
3.35% |
Wells Fargo & Company | WFC |
179,753 |
3.26% |
Coca-Cola Company, The | KO |
177,961 |
3.23% |
Pfizer Inc. | PFE |
177,699 |
3.22% |
Philip Morris International In | PM |
157,413 |
2.86% |
Oracle Corporation | ORCL |
157,217 |
2.85% |
JPMorgan Chase & Co. | JPM |
140,478 |
2.55% |
Merck & Co., Inc. | MRK |
131,998 |
2.39% |
Intel Corporation | INTC |
131,729 |
2.39% |
Verizon Communications Inc. | VZ |
125,522 |
2.28% |
PepsiCo, Inc. | PEP |
114,215 |
2.07% |
Amazon.com, Inc. | AMZN |
109,025 |
1.98% |
QUALCOMM, Inc. | QCOM |
107,805 |
1.96% |
Visa Inc | V |
104,389 |
1.89% |
Abbott Laboratories | ABT |
103,451 |
1.88% |
Cisco Systems, Inc. | CSCO |
102,102 |
1.85% |
Schlumberger Limited. | SLB |
99,235 |
1.80% |
Walt Disney Company, The | DIS |
90,539 |
1.64% |
Comcast Corporation | CMCSA |
90,482 |
1.64% |
Grand Total |
5,512,183 |
What are the new companies? Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK), Schlumberger Limited. (NYSE:SLB), Abbott Laboratories (NYSE:ABT), Visa Inc (NYSE:V), QUALCOMM, Inc. (NASDAQ:QCOM), Amazon.com, Inc. (NASDAQ:AMZN), PepsiCo, Inc. (NYSE:PEP), Oracle Corporation (NASDAQ:ORCL), Philip Morris International Inc. (NYSE:PM), Wells Fargo & Company (NYSE:WFC), Berkshire Hathaway Inc. (NYSE:BRK.B) (NYSE:BRK.A), Google Inc (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL).
Who leaves? Alcoa Inc. (NYSE:AA), The Travelers Companies, Inc. (NYSE:TRV), United Technologies Corporation (NYSE:UTX), 3M Co (NYSE:MMM), McDonald’s Corporation (NYSE:MCD), Kraft Foods Inc (NASDAQ:KFT), Hewlett-Packard Company (NYSE:HPQ), The Home Depot, Inc. (NYSE:HD), E I Du Pont De Nemours And Co (NYSE:DD), Caterpillar, Bank of America Corp (NYSE:BAC), The Boeing Company (NYSE:BA) and American Express Company (NYSE:BAC).
Now, that said, give the folks at News Corp (INDEXDJX:.DJI) some credit. They created a flawed Behemoth index, but it is the only widely quoted Behemoth index, and my adjustment of it only improves the market capitalization by ~40%. That said, capitalization-weighting makes it a much more rational index, and so I call upon Dow Jones News Corp (NASDAQ:NWSA) (NASDAQ:NWS) to make the changes that the sentimental at Dow Jones never would, and turn the DJIA into the NCI. Not an average, but a real Behemoth index that measures the performance of the largest companies of the US, which comprise ~30% of the total market capitalization.
There is the challenge, and taking it on will benefit investors for the next 100 years. Are you man enough to take it on, News Corp?
Full disclosure: Long CSCO, CVX, HPQ, INTC, TRV, WMT, ORCL
By David Merkel, CFA of alephblog