What stock will replace GM in the Dow Jones?
Jun 1st 2009 8:30AM
Updated Dec 4th 2009 1:22PM
With General Motors Corp. (GM) filing for bankruptcy protection, it will no longer be part of the Dow Jones Industrial Average stock index. The question is what stock will replace it. One main consideration will likely be a company's market capitalization. If other, current components of the index are any indication, it probably would have to have a market cap of at least $50 billion. Ideally, the company also would have shares that are widely traded and the firm would be a household name.
More difficult than the issue of the size of the company, however, is the issue of what sector it would represent. Will the DJIA get more weight from the tech sector? Retail? Consumer products?
With technology becoming a bigger part of the American economy each year, two or three companies from the tech sector would be candidates. Based on size, reputation and share volume, Cisco ( CSCO), Oracle (ORCL) and Apple (AAPL) would have to be on the short list.
Since consumer spending is by far and away the largest part of GDP, a consumer products company would have to be on the list of stocks being considered. The most likely candidates are Colgate Palmolive (CL) and PepsiCo (PEP).
No matter what company is chosen, though, the weighting of the index will move away from old-line manufacturing as that part of the economy fades to black.
Douglas A. McIntyre is an editot at 24/7 Wall St.