In Boon to Its Stock, Apple Will Replace AT&T in Dow Index


Apple, the highest-valued company in the world, will be added to the Dow Jones industrial average next month in yet another sign of how popular the computer giant has become for investors.

Apple, a top investment holding for risky hedge funds as well as retirees, will replace the telecommunications company AT&T, a technology standard-bearer in its day, on March 19, S&P Dow Jones Indices said in an announcement on Friday.

The step, which had been widely expected, is a reminder of the soaring valuations among consumer-driven technology and social media companies like Google, Facebook and Twitter.

But no company approaches Apple in terms of raw value. Its market capitalization of $744 billion is about equal to the gross domestic product of Saudi Arabia, and analysts have predicted that the company could soon become the world’s first trillion-dollar company.

In addition, the company’s cash pile of $178 billion is larger than the stock market valuations of companies like IBM and Amazon.

“The D.J.I.A. is price-weighted, so extremely high stock prices tend to distort the index while very low stock prices have little impact,” David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in a statement. “Among the current D.J.I.A. constituents, AT&T has one of the lowest prices. Moreover, the D.J.I.A. is overweighted in telecommunications.”

Furthermore, he added, Apple’s stock split last year “brought the stock price down closer to the median price” in the Dow.

To the extent that investors needed another excuse to snap up more Apple shares, the change will give them one.

The stock was up 2 percent in early trading on Friday at $128, not far from their record high.

Many portfolio managers and investors use the Dow to measure their performance, and with Apple added to the index, they will be compelled to buy the stock or add to existing positions.

And with more and more funds flowing from active managers to index-tracking investments such as exchange-traded funds, the buying pressure on Apple is likely to continue for some time.

Apple is already a major component of the Nasdaq and the Standard & Poor’s 500-stock index, the other major stock indexes that investors track closely.

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