Icon GE Dropped From The Dow
It has been coming for a while, but has now finally happened - after years of declining performance, corporate revamps, management changes and incompetence - all leading to weakening profitability, one of America’s foundation industrial giants - General Electric - has been punted from the Dow Jones index after a more than a century.
From next Tuesday, June 26 it will be placed in Americas blue chip index by Walgreens Boots Alliance, a retail pharmacy (drugstore) and healthcare services chain.
General Electric was an original member of the Dow index back in 1896 and a member continuously since 1907. This will be the first change in the Dow since Apple replaced AT&T in 2015.
AT&T will be knocking on the door again once it gets the merger with Time Warner under its belt.
Walgreens is a national retail drugstore chain offering prescription and non-prescription drugs, related health services and general goods (it was originally a drugstore chain).
With its addition, the DJIA will be more representative of the US economy which is now dominated by services, while manufacturing, agriculture and mining and oil (the traditional mainstays of the Dow) have declined in importance (tell Donald Trump that).
Services have boomed, led by financial activities, health, retailing and tech related offerings.
“The U.S. economy has changed: Consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, explained in a statement in the US on Tuesday’s.
“Today’s change to the DJIA will make the index a better measure of the economy and the stock market,” Blitzer said.
The move is all symbolism (at one stage it and IBM vied to be the most valuable companies in the US economy, but now that is dominated by the likes of Apple, Amazon, Alphabet (Google), Netflix (whose shares topped $US400 on Tuesday for the first time ever) Facebook and Microsoft.
Warren Buffett’s Berkshire Hathaway is the largest industrial conglomerate on the US markets with a value of $US472 billion to GE’s $US114 billion. GE shares are down 53% in the past year while Berkshire’s are up 12%.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.