Apple, Google about to join Dow Jones stock index?

Barron's reports that the Dow Jones Industrial Average is due a makeover and that Apple and Google better represent the global business landscape.

Apple and Google could soon see themselves in the Dow Jones Industrial Average -- perhaps at the expense of a tech pioneer.

The stock index is due for a makeover and the two tech titans wield a lot of influence in financial markets, investment newspaper Barrons reported today (subscription required). The companies "represent major shifts in the global business landscape" in ways that the venerable Hewlett-Packard, Bank of America, and Alcoa do not, Barron's said.

"The guardians of the Dow need to ensure that this benchmark, created in the 19th century, stays relevant for a 21st century market," the newspaper wrote.

With a market capitalization of about $563 billion, Apple has emerged as the world's most valuable company since the stock index last adjusted its components in 2009.

However, adding either company to the index may be tricky, Barron's noted, because the Dow calculates the famous 30-stock index based on share price. Apple would suddenly overwhelm the index with a 26 percent weighting, more than twice the influence carried by IBM's 12 percent weighting.

Barron's suggested that Apple could guarantee itself a spot in the index by executing a 5-to-1 or even 10-to-1 stock split. Apple surpassed Google in share price earlier this month, while Google announced its first-ever stock split a week later.

There is no official timetable for a makeover of the index.

 

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