DJIA Index Changes (MO, HON, BAC, CVX)

It’s been a while since we have seen any serious changes to the Dow Jones industrial Averages components, with 2004 being the last change and 1999 before that.  This morning there are some announced changes to the components:

• Bank of America (NYSE: BAC) and Chevron (NYSE: CVX) are being added into the index.
• Altria (NYSE: MO) and Honeywell (NYSE: HON) are being removed from the list.   

There will probably be some criticism here for "changing an index to populist trends."  The DJIA is also a price-weighted index, although this will not result in massive changes to the index components elsewhere.  We’ll follow up with more if we make any serious determinations:

• Deletes: HON $57.83; MO $73.09
• Adds: BAC $42.16; CVX $79.26

It is interesting that despite the problems in the financial sector that the DJIA chose to include bank of America.  Perhaps that is a solid vote of confidence if there ever was one. Interestingly enough, Chevron used to be a component and was replaced in the 1990’s.

Honeywell is a bit of a surprise.  But Altria is actually not that surprising when you consider that it completely unloaded Kraft Foods (NYSE: KFT), is about to unload Phillip Morris International as a separate unit, and will probably retire quite a bit of stock in a share buyback.

As large as the DJIA is for "the market," it is far smaller in index weightings for money managers than the S&P 500 Index, and this will not have any direct impact on their weightings in the S&P 500 index.

Jon C. Ogg
February 11, 2008