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NKE could be the next company dropped from the Dow Jones Industrial Average given its low stock price—and that might allow Berkshire Hathaway to finally make it into the venerable index.

Alphabet will be added to the Dow on June 29, replacing Verizon Communications. S&P Dow Jones Indices, which oversees both the Dow industrials and S&P 500 index, said that Verizon is leaving in part because its low stock price–around $46—gave the company an “immaterial impact” on the price-weighted index.

Nike is vulnerable to being booted out of the Dow industrials because it has an even lower stock price than Verizon, with shares trading at $42 apiece.

What company could be next to join the Dow industrials? Berkshire Hathaway, which has a $1 trillion market capitalization, might finally make the cut—and it would be fitting to add the conglomerate while its chairman and controlling shareholder Warren Buffett, 95, is still alive. Berkshire’s class B shares trade at nearly $500 apiece, which would fit right into the index, which now is full of higher-priced stocks trading above $100 a share. Berkshire’s weighting would be above 5%.

https://stocks.apple.com/AuPtAPUC9SFeInf0QAPrc0g

S&P Dow Jones Indices, which oversees both the Dow industrials and S&P 500 index, said that Verizon is leaving in part because its low stock price–around $46—gave the company an “immaterial impact” on the price-weighted index.

Verizon’s weighting was around 0.5%, while Goldman Sachs, whose stock trades for nearly $1,100 a share, has the highest weighting in the index at around 13%.

The price-weighted nature of the DJIA is asinine. They really should put the index out to pasture.

The price-weighted nature of the DJIA is asinine. They really should put the index out to pasture.

The argument for keeping it that way has always been the consistency: they've always done it that way, so there is no discontinuity in that sense.

But it would be very easy to have all new entrants be given a weighting equal to (say) $100 per share the day they enter, leaving all existing picks unchanged. Or new entrants could even have an initial weighting of 1/30th of the total.

But it isn't really worth the bother fixing the weighting, since it has so many other flaws. It's not really an index in the modern sense, it's just a hand picked set of "industry leaders" that changes from time to time. The Ark Innovation of the gilded age.

Jim

They really should put the index out to pasture.

Get behind me Satan!

There’s still money to be made licensing a dead brand, and the Dow is one of the deadest, yet alive every day on newscasts, financial sites, mutual fund prospecti, and everywhere else in the world of investing. They reap size dollars from letting other people use the name, and for almost no effort!

This is the queen bee of dead IP, putting such other trademark licensors like Sharper Image, Polaroid, Radio Shack, Kenmore and others to shame with the ability to mint money without actually providing any value. I only wish I had something that easy.

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