|
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 |
?9.21 |
0.23% |
2.20 |
|
| AXP?American Express Co |
56.42 |
19.61% |
3.35% |
?1.00 |
63.96 |
1.62% |
2.07 |
|
| BA?Boeing Co |
70.36 |
-4.08% |
4.17% |
?1.25 |
52.90 |
1.34% |
3.12 |
|
| BAC?Bank of America Corp |
?8.15 |
46.58% |
0.48% |
?0.14 |
87.83 |
2.22% |
0.22 |
|
| CAT?Caterpillar Inc |
87.63 |
-3.28% |
5.20% |
?1.56 |
57.25 |
1.45% |
3.59 |
|
| CSCO?Cisco Systems Inc |
19.12 |
5.78% |
1.13% |
?0.34 |
?101.97 |
2.58% |
0.44 |
|
| CVX?Chevron Corp |
?111.29 |
4.60% |
6.60% |
?1.98 |
?218.37 |
5.52% |
1.20 |
|
| DD?E. I. du Pont de Nemours and Co |
50.24 |
9.74% |
2.98% |
?0.89 |
46.74 |
1.18% |
2.52 |
|
| DIS?Walt Disney Co |
49.17 |
31.12% |
2.92% |
?0.87 |
88.22 |
2.23% |
1.31 |
|
| GE?General Electric Co |
20.64 |
15.24% |
1.22% |
?0.37 |
?217.93 |
5.51% |
0.22 |
|
| HD?Home Depot Inc |
56.55 |
34.51% |
3.35% |
?1.01 |
84.88 |
2.14% |
1.56 |
|
| HPQ?Hewlett-Packard Co |
17.64 |
-31.54% |
1.05% |
?0.31 |
34.77 |
0.88% |
1.19 |
|
| IBM?International Business Machines Co… |
?195.70 |
6.43% |
11.61% |
?3.48 |
?223.64 |
5.65% |
2.05 |
|
| INTC?Intel Corp |
25.04 |
3.26% |
1.48% |
?0.45 |
?125.28 |
3.17% |
0.47 |
|
| JNJ?Johnson & Johnson |
67.74 |
3.29% |
4.02% |
?1.21 |
?186.76 |
4.72% |
0.85 |
|
| JPM?JPMorgan Chase and Co |
37.23 |
11.97% |
2.21% |
?0.66 |
?141.43 |
3.57% |
0.62 |
|
| KFT?Kraft Foods Inc |
41.28 |
10.48% |
2.45% |
?0.73 |
73.25 |
1.85% |
1.32 |
|
| KO?The Coca-Cola Co |
38.11 |
8.93% |
2.26% |
?0.68 |
?171.57 |
4.34% |
0.52 |
|
| MCD?McDonald’s Corp |
88.25 |
-12.04% |
5.23% |
?1.57 |
88.99 |
2.25% |
2.33 |
|
| MMM?3M Co |
91.98 |
12.54% |
5.45% |
?1.64 |
63.59 |
1.61% |
3.39 |
|
| MRK?Merck & Co Inc |
42.80 |
13.53% |
2.54% |
?0.76 |
?130.35 |
3.29% |
0.77 |
|
| MSFT?Microsoft Corp |
30.26 |
16.54% |
1.79% |
?0.54 |
?253.64 |
6.41% |
0.28 |
|
| PFE?Pfizer Inc |
23.74 |
9.70% |
1.41% |
?0.42 |
?177.33 |
4.48% |
0.31 |
|
| PG?Procter & Gamble Co |
66.68 |
-0.04% |
3.95% |
?1.19 |
?183.65 |
4.64% |
0.85 |
|
| T?AT&T Inc |
36.56 |
20.90% |
2.17% |
?0.65 |
?210.91 |
5.33% |
0.41 |
|
| TRV?Travelers Companies Inc |
64.80 |
9.51% |
3.84% |
?1.15 |
24.97 |
0.63% |
6.09 |
|
| UTX?United Technologies Corp |
79.20 |
8.36% |
4.70% |
?1.41 |
72.21 |
1.82% |
2.57 |
|
| VZ?Verizon Communications Inc |
42.25 |
5.31% |
2.51% |
?0.75 |
?120.37 |
3.04% |
0.82 |
|
| WMT?Wal-Mart Stores Inc |
71.56 |
19.75% |
4.24% |
?1.27 |
?242.16 |
6.12% |
0.69 |
|
| XOM?Exxon Mobil Corp |
87.31 |
3.01% |
5.18% |
?1.55 |
?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, I considered how much influence 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 [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 DJIA, like the S&P 500?
At this point, Exxon Mobil would be the heavy hitter, and small Alcoa the baby.? Prediction: Alcoa and The Travelers will leave the Dow, to be replaced by Oracle and Berkshire Hathaway “B” shares.
Wait! Oracle?! Why not Apple or Google?? Their share prices are too high, and the DJIA is too messed up already.? If Bank of America wanted to help the Dow, they would do a 1-10 reverse split, as should Alcoa, 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 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, Schlumberger,? Abbott Labs, Visa, QUALCOMM, Amazon, Pepsico, Oracle, Philip Morris, Wells Fargo, Berkshire Hathaway, Google, and Apple.
Who leaves? Alcoa, Travelers, United Technologies, 3M, McDonalds, Kraft Foods, Hewlett-Packard, Home Depot, Du Pont, Caterpillar, Bank of America, Boeing and American Express.
Now, that said, give the folks at News Corp Dow Jones 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 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
Well the S&P100 or STOXX USA 50 are there if you want a reasonable large cap index. People who still look at the DJIA are not going to be interested by an improvement in index methodology, if they were they would already have switched.
Besides if you compare the behaviour of DJIA vs better indices, there’s not that much difference, basically in relatively efficient markets, indexing methodology in relatively irrelevant, any random weighted random selection of a few dozen large caps will behave pretty much the same as any other.
I mean on most days most stock markets behave the same, it took the big earthquake in Japan for the Nikkei to decouple from the SP500 — they had hugged each other for like 3 years before that in currency normalised total return terms.