Dow Jones index’s manager on Friday announced that Apple will replace AT&T on March 19. The index’s position does not have an effect on the valuation of the companies, though the position can be quite important to companies.
After the major success of iPhone 6, the company became the first US company to cross $750 billion market valuation. In 2014, Apple offered seven shares each to shareholders of the company. Other companies in the Dow Jones Industrial Average include 3M, American Express, Coca-Cola and others. However, Apple won’t remain top billing with Dow as it is held by Goldman Sachs.
“It underscores that technology continues to be a critical driver of the overall economy,” said Bill Kreher, an analyst at Edward Jones.
Other leading companies like Microsoft and Cisco will share space with Apple. Cupertino, California-based Apple Inc. will only have the 4.66 percent weight in the DJI because of its price. Earlier, the reshuffle took place in September 2013 when HP, Alcoa and Bank of America were removed. Visa, Nike and Goldman Sachs were the new entrants. Microsoft and Intel were added in November 1999.
Apple will see a marginal increase after its addition to the index in a few days. The index-average measures the weights of the company by measuring how much it costs to buy a single share. Goldman Sachs share sold for $181.91 when compared to Apple’s $126.60 on Friday. The index company stated that reshuffling of companies would not affect the overall level of the index which stood at 17,856 on Friday.
“This is a sign of the times, and it might get everyone to look at the Dow more than they have been,” said Richard Sichel, who oversees $2 billion as chief investment officer at Philadelphia Trust Co. “It would be difficult to pick any 30 companies that would cover the entire economy, especially compared with theS&P 500, but it does give the Dow more credibility.”
However, AT&T change was apparent due to stiff competition from T-mobile and Sprint along with the addition of smartphone users in the US. The second-leading wireless carrier saw only 3.5 percent stock growth while Apple had 67 percent growth in the past 12 months. The company was also hit by its own ways of removing subsidies and promote installment plans where the user has to pay the full price of a phone eventually.