Walgreens-GE Faceoff: How Impactful Is It For Dow Investors?
Zacks Investment Research | Jun 20, 2018 09:40PM ET
Walgreens Boots Alliance (NASDAQ:WBA) has achieved a historic feat yesterday on emerging as the youngest participant on the Dow Jones Industrial Average (DJI) or DJIA. This is a momentous exploit not just because this goliath stock has entered the world’s most coveted index but more so for dramatically replacing Dow’s oldest member, General Electric Company (NYSE:GE) . With this success, Walgreens stalled GE’s uninterrupted run on the exchange for 110 long years.
The change will be effective Jun 26 market opening.
Let’s delve deeper into the significance of the decision for Dow investors.
GE Booted Off: How Far is This Logical?
The S&P Dow Jones indices report says that “General Electric was an original member of the DJIA in 1896 and a member continuously since 1907”. However, per the index, this decision was prompted by the GE stock’s persistent trading at a low price of late, which affected the entire index’s price performance in turn.
Going by the report, “the DJIA is a price-weighted index and the range of prices among its 30 constitutes matter. The low price of GE shares means the company has a weight in the index of less than one-half of one percentage point.”
Overall, GE’s market capitalization rose to $594 billion in 2000 and has shrunk unbelievably over the years to $111.87 billion at present.
Over the past year, shares of GE have nose-dived by more than 50%, a significant plunge justifying the above logic. If we compare the stock with its broader Original post
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