news net daily :
It’s been this way since Charles Dow first founded a predecessor to the modern Dow Jones Industrial Average in 1885 — when there were only 12 stocks in it instead of 30 and prices mattered more than market value.
“In our view, the shuffle highlights the importance of diversification in ensuring that investors are well exposed to the winners in a post-Covid-19 world,” said Mark Haefele, chief investment officer with UBS Global Wealth Management, in a report Monday.
And since Amazon and Alphabet both have stock prices in the quadruple digits, there is no way they could have been added to the Dow unless they too split their stocks. Otherwise, they would make up an outsized percentage of the Dow’s weighting.
A spokesman for S&P Dow Jones Indices told CNN Business that potential Dow replacements also need to “command a reasonable weight based on its stock price.”
The spokesman added that any time changes are made to the Dow, “many factors are considered including trying to represent the broad swath of sectors and sub industry groups” among larger stocks.
Why Salesforce made more sense to add than Facebook
But Howard Silverblatt, senior index analyst for S&P Dow Jones Indices, noted the addition of Salesforce will allow the Dow to maintain a nearly 25% weighting to pure tech stocks.
But what most ordinary investors consider to be tech companies are viewed as “communications services” firms by the folks who manage the Dow. That includes Facebook.