Dow Shakeup: Goldman, Nike, Visa In; HP, BofA, Alcoa Out

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Goldman Sachs Group Inc (NYSE:GS), Nike Inc (NYSE:NKE) and Visa Inc (NYSE:V) have been added to the benchmark index Dow Jones Industrial Average. The changes will become effective on September 20, reports Colin Barr of The Wall Street Journal. It’s the biggest reshuffle of the index since April 2004, when AT&T Inc. (NYSE:T), International Paper Company (NYSE:IP) and Eastman Kodak Company (OTCMKTS:EKDKQ) were replaced by Verizon Communications Inc. (NYSE:VZ), Pfizer Inc. (NYSE:PFE) and American International Group Inc (NYSE:AIG).

Dow Shakeup: Goldman, Nike, Visa In; HP, BofA, Alcoa Out

Falling stock prices prompted reshuffle

In the latest shake-up, the sports gear maker Nike Inc (NYSE:NKE) will replace Alcoa Inc (NYSE:AA), which has been on the index for the past 54 years. Goldman Sachs Group Inc (NYSE:GS) will replace Bank of America Corp (NYSE:BAC). Payment processing giant Visa Inc (NYSE:V) will dethrone Hewlett-Packard Company (NYSE:HPQ), which joined the blue chip benchmark in 1997.

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The changes make absolute sense given the crumbling fortunes of Hewlett-Packard Company (NYSE:HPQ) and Alcoa Inc (NYSE:AA). Bank of America Corp (NYSE:BAC) shares have fallen 61.97 percent over the past 10 years. Hewlett-Packard Company (NYSE:HPQ)’s share prices have declined from $50 in 2010 to $22.36 today. BAML analysts estimate that the Palo Alto-based computer maker can’t turn around. In 2007, shares of the aluminum maker Alcoa Inc (NYSE:AA) were trading above $40. But they have fallen to $8 per share now. S&P Dow Jones Indices LLC said in a statement that the Index Committee’s decision to replace three companies was based on their falling stock prices and the Committee’s willingness to diversify the sectors representing the index.

Shakeup unlikely to affect the Dow Jones benchmark index

S&P Dow Jones Indices LLC said that the move is unlikely to affect the benchmark index level, which recently set a new all-time high record. The Dow Jones Industrial Average has a different indexing method. Rather than weighing each component by their market capitalization, it weighs components based on their stock price.

Last year, UnitedHealth Group Inc. (NYSE:UNH) replaced Kraft Foods Group Inc (NASDAQ:KRFT) from the index after the latter decided to spin off its North American grocery business. Kraft Foods Group Inc (NASDAQ:KRFT) had joined the index in 2008 when American International Group Inc (NYSE:AIG) was replaced following a government bailout.


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