Should GM be Removed from the DJIA?

Topic: Investing

Should Dow boot GM? by Chris Isidore,

GM’s market capitalization has fallen to about $11 billion, less than half that of the next smallest Dow stock…

“It is coming,” he said of the idea of a foreign Dow component. “This whole globalization situation is making that more and more likely.”

He said he doubts that GM would be replaced as long as it is still the world’s leading automaker, but Toyota could claim that title from GM as soon as 2006.

“That would be the time to replace it, not before,” said Hirsch.

I agree removing GM makes sense, though I see no reason to wait. Whether to replace it with Toyota (market cap: $167 Billion), DaimlerChrysler or something else is an interesting question. Of course the whole idea of the Dow Jones Industrial Average pretty much outlived its usefulness decades ago. The S&P 500 has long been far better measure of the stock market but still the dow has retained its status as news worthy, for some reason (View the current dow stocks).

As for the S&P 500 it looks like my guess that Google would be added to the S&P 500 by the end of this year is going to be incorrect. I must admit I think that failure was really a mistake by S&P, and not just because it makes me wrong. The market capitalization, trading and import of Google make it an obvious choice for the S&P 500. But I would rather be wrong about that and right to have bought it, than the other way around. Google’s market cap: $126 Billion.

I will post more details soon but if you are interested the “10 stocks for 10 years fund” I am managing via Marketocracy has performance results available online.

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3 thoughts on “Should GM be Removed from the DJIA?

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