Apple Inc. (NASDAQ:AAPL) is currently the company with highest market cap in the world. But even with these credentials Apple Inc. (NASDAQ:AAPL) did not get a place in the 30 stock that represent the Dow Jones Industrial Average (INDEXDJX:DJI) till March 2015. What could be the possible reasons behind not adding such a big company like Apple Inc. (NASDAQ:AAPL) into the index for such a long time? Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, David Blitzer talked on CNBC about the reasons behind the exclusion of Apple Inc. (NASDAQ:AAPL) from DJI for such a long time.
Apple Inc. (NASDAQ:AAPL) was officially added into the Dow Jones Index almost a month back at the expense of AT&T Inc. (NYSE:T). Blitzer pointed out that two splits played a major role in the addition of Apple Inc. (NASDAQ:AAPL) stock into the Dow Jones Index.
“In the case of Apple and Dow, it was very much driven by two splits. Apple split, because $700 per share, it would have messed up the index, because of the way index is calculated, which is unusual and may be strange, but we have been doing it since 1896. And then when the Visa split came along, we had to do something, otherwise we would have lost most of the tech weighting in the Dow, 7 percentage points. So that was the timing. But do we look at technical analysis, no.” Blitzer said.
Blitzer pointed out that Apple Inc. (NASDAQ:AAPL)’s 7 to 1 stock split back in June 2014 made it more viable for the Dow Index. He said that according the index calculation method, before the split, Apple Inc. (NASDAQ:AAPL) stock with around $700 per share would have messed up the index.
He added the second reason behind Apple Inc. (NASDAQ:AAPL) addition to Dow Index was the Visa Inc (NYSE:V)’s 4 to 1 stock split during the end of January in this year. Blitzer said that the Visa split has made the index lose a lot of tech weighting. So he said that the Visa split triggered the decision to include Apple Inc. (NASDAQ:AAPL) into the Dow Index.
Another big tech name to miss out on the list of Dow Index is Google Inc (NASDAQ:GOOGL). Blitzer said that the reason for excluding Google is exactly the same as Apple Inc. (NASDAQ:AAPL) before the split. He said that Dow Index has just 30 stocks to represent more than 4000 stocks.
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