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Here Come More Changes To The Dow
Charles B. Carlson, CFA
Contributing Editor, Dow Theory Forecasts
As you've probably read, General Electric is acquiring Honeywell. That deal has significant repercussions for the composition of the Dow Jones Industrial Average. Indeed, both GE and Honeywell are Dow components. Thus, with Honeywell merging with GE, the people who choose the components for the Dow will have to make a choice.
Or choices.
Indeed, I expect the guardians of the Dow to make more than one change. In addition to Honeywell, I wouldn't be surprised to see Eastman Kodak get the boot from the Dow.
What are the likely candidates to join this illustrious fraternity of stocks? The easy choice is Cisco Systems. The company has one of the largest market capitalizations of any stock on any exchange. Its businesses are clearly "new economy," a direction the Dow has been heading in recent years.
After Cisco, however, there is no real leader. Dark horses include:
- Medtronic, Pfizer, and Amgen in the medical sector.
- Charles Schwab and AIG in financial services.
- Motorola and Oracle in the technology sector.
A real dark horse is AOL-Time Warner. Admittedly, I think this is a long shot, but the new AOL-Time Warner would certainly give the Dow a different look (including its first Internet play).
When will the changes in the Dow occur? I wouldn't be surprised if the Dow folks make a move (or moves) before year-end.
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