Once upon a time, there was a journalist named Charles Dow who began his reporting career at the Keenan Wall Street Financial News Bureau.
Then, in 1822, Dow began working closely with Edward Jones, and the two formed Dow Jones & Co. Dow and Jones work together to Afternoon letter from a customer, was a daily economic news bulletin. Then, by integrating a large number of publications, wall street journal.
In this daily two-page paper, Dow and Jones provided a detailed overview of the day’s financial news. Soon he had more than 1,000 subscribers and was considered an important news source for investors. During this time, Dow wrote about many concepts that are well known among investors today.
For example, the Dow Theory is still widely used today. This theory asserts that if one average reaches a high price, followed by another average, the market is trending up. This confirms that the movement is genuine.
But perhaps his greatest legacy, apart from that, was wall street journalthe Dow Jones Industrial Average.
On May 26, 1896, Dow and Jones officially created the Dow Jones Industrial Average using the top 12 stocks on the market at the time. At that time, the average consisted primarily of industrial enterprises and railroads. By 1916 the number of companies included in the index had increased to 20 companies, and in 1928 it was raised again to its current level of 30 companies.
For a long time, people referred to the Dow as a benchmark when talking about general market price trends. It’s as American as apple pie in finance.
But today, the S&P 500 is more representative of the economy.Companies that dominate the market such as NVIDIA Corporation (NVDA) have been top players for many years. Apple. (AAPL), the S&P 500 includes the 500 largest publicly traded companies in the United States.
Additionally, the Dow has lagged the S&P 500 in recent years due to the fact that it is less tech-oriented. In fact, over the past year the Dow Jones Industrial Average is up nearly 20%, and the S&P 500 index is up over 30%.
On Monday, the Dow adjusted stocks to catch up with the S&P 500. So, today, market 360, details the changes Dow has made. Next, I’ll share what this means for the added stocks and where I think investors should focus.
Dow’s upheaval
Now, before we get into the latest additions to the Dow, it’s important to note that this index is weighted by price, not market capitalization. This means that stocks with higher stock prices have a greater impact on the movement of the index.
And this Monday’s addition will certainly impact the index.what i’m talking about is Amazon.com Inc. (AMZN).
Before the opening bell rang on Monday morning, Amazon replaced the drugstore chain. walgreens boots alliance (W.B.A.). This is the first change in the Dow Jones Industrial Average since 2020. Salesforce Co., Ltd. (CRM), amgen company (AMGN) and Honeywell International Co., Ltd. (Hong) has been replaced ExxonMobil Corporation (XOM), Pfizer Japan Inc (PFE) and RTX Co., Ltd. (RTX), formerly known as Raytheon Technologies, Inc.
But the question is… why were the shares added?
Well, that’s due to a 3-1 split by another company in the Dow… Walmart Co., Ltd. (WMT). As mentioned above, the Dow is weighted by price. And given the Wal-Mart stock split, the Dow Jones Industrial Average needed to be rebalanced because this would reduce its weight in the index.
When it came to choosing a stock to cut back on, Walgreens was the obvious choice. The drugstore chain has struggled in recent years, with its stock price down about 34% in the past year and losing nearly 62% of its value over the past five years. Moreover, with a market capitalization of $18 billion, it is difficult to argue that the company belongs to an index that is supposed to represent the entire economy. And it made the most sense given the fact that it had the lowest price of all the companies included in the index.
After the exchange, Amazon ranked 17th among the 30 Dow stocks.
Now, this addition of Amazon clearly reflects the dominance that the “Magnificent Seven” technology companies have in the market.
Let’s take a look at last year’s S&P 500. The Magnificent Seven accounts for 30% of the index’s market capitalization. And, fueled by the artificial intelligence boom, this group of stocks helped push the S&P 500 to an all-time high in 2023.
Therefore, adding Amazon to the Dow should return the index to a more modern status and, in turn, help the index catch up with the S&P 500.
Is Amazon something to buy?
Now, with this addition, investors may be wondering whether it’s a good time to buy an exchange-traded fund (ETF) that tracks the Dow or whether it’s a good time to buy Amazon stock.
Let me just say that I am personally not a big fan of ETFs and do not recommend investing in them. SPDR Dow Jones Industrial Average ETF Trust (diamond) (and other types, for that matter).I explained the reason last time. market 360 Article (you can read more here).
Now, considering the fundamentals, it was the right decision to switch WBA to AMZN based on my portfolio grader’s opinion. Currently, AMZN has an A rating and WBA holds an F rating.
Yes, AMZN is a “buy” for now.
While it is true that as a result, AMZN’s profile will further increase and there will likely be more buying pressure from institutional investors (AMZN hit a new 52-week high intraday following the rally on the Dow), This does not necessarily mean that stock prices will rise. Soar.
In fact, it rose more than 7% to $171.81 on February 2nd following the February 1st earnings report, before falling to $170.31 on February 5th (the next business day). AMZN recovered in the last week of this month, but that recovery was largely due to his NVIDIA earnings report lifting the overall market.
The reality is that Amazon has a market capitalization of $1.8 trillion, so its move to the Dow is probably long overdue. Therefore, I would argue that there are better stocks out there that have the potential to rise more…
Where should I look instead?
In fact, money is starting to flow into other stocks that are thriving with explosive sales and profit growth.
And the stocks that I expect to benefit the most are small and mid-caps.
The reality is that there is a huge opportunity for small- and mid-cap stocks to outperform these heavyweights this year.I’m talking about blue chip stocks. good foundation We will continue to see strong earnings and sales growth.
and me Acceleration of profits The Buy List is chock-full of stocks like this.
In fact, our buy list is up 14% so far in February, more than triple the Dow’s 2.2% gain and more than double the S&P 500’s 5.1% gain. With results like this, we are confident that we are making the best investment. Acceleration of profitsand our stock price should continue to rise strongly.
Now, one of the reasons I’m so confident is the system I use. Acceleration of profits We harness the power of financial superintelligence to pinpoint companies that are likely to report strong financial results, resulting in skyrocketing stock prices.
I call this a source of income quantum cash project. And that is nothing short of one of my greatest professional accomplishments.
At its core, quantum cash uses a series of AI algorithms to continuously examine large amounts of data, looking for patterns. Many of these patterns are nonlinear and cannot be seen with the naked eye. But the more data you feed it, the more patterns it can detect.
To learn more about my Quantum Cash system and how to incorporate it Acceleration of profitsclick here.
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Sincerely,
Louis Navellier
Editor, market 360
The Editor discloses that, as of the date of this email, the Editor directly or indirectly owns the following securities: These securities are the subject of, or are referenced in, the commentary, analysis, opinion, advice, or recommendation in this email. Essay stated below:
Amgen (AMGN), NVIDIA Corporation (NVDA) and Exxon Mobil Corporation (XOM)
